Ardagh Packaging Group, the Luxembourg-based packaging group run by Paul Coulson, has had its credit rating cut by credit rating agency Moody’s.

The agency has expressed concern about the delay in closing its €1.275 billion takeover of Veralia North America.

Moody’s have also flagged the underperformance of its European metals business and the group’s “weak credit metrics, with high leverage and negative free cash flow”.

Ardagh’s “corporate family rating” has been cut to B3 from B2, both speculative or junk grades. The outlook for the rating is stable provided the company restructures its European metals business, raises equity and does not undertake any more debt-financed acquisitions, said Moody’s.

The completion of the Veralia North America acquisition has been delayed by the intervention by the US federal trade commission. Ardagh will have to dispose of four production facilities in the US, which will result “in a negative impact on EBITDA and cash flow generation” said Moody’s. It will also delay synergies that the company originally expected to achieve in 2013.

The metals business – which comprises about 32 per cent of the group – has “materially underperformed our original expectations for 2013”, said Moody’s.

The agency acknowledges the company plans to address the problem but warns this would involve significant upheaval in the business.

Moody also warned that even if Ardagh succeeds in raising equity, via its long-awaited flotation, in order the pay down borrowings its debt to earnings ratio will still be high and its “financial metrics weak”.

“Moody’s expects free cash flow to remain negative until 2015, with cash absorbed in the restructuring of the European metals business and strategic projects in Europe and the US,” it added.

Liquidity remains adequate for near-term requirements and it does not have any significant debt repayments before 2017.