Owens-Illinois says healthy balance sheet a priority, cites debt reduction, 'excellent liquidity'

By Paul Deckelman

New York, Dec. 14 - Owens-Illinois Inc. has made considerable progress on the debt-reduction front over the last few years, and its chief financial officer said that maintaining a healthy balance sheet and keeping its ratio of net debt to EBITDA below 3 times and well under the maximum level permitted under its lending agreement remains a key priority.

Edward C. White - who is also a senior vice president for Perrysburg, Ohio-based Owens-Illinois, the world's largest producer of glass containers - told attendees at the Bank of America Merrill Lynch Global Industries Conference on Tuesday in New York that besides lowering its leverage, the company "has been very busy improving our debt profile" by extending its maturities.

Back in 2005 and 2006, the net debt-to-EBITDA ratio was 4x - but since that time, it has fallen by as much as 45%, nose-diving to 2.2x in 2007 and bottoming at 2.0x in 2008, helped by the reduction of the company's senior secured debt using the $1.825 billion of cash proceeds from the 2007 sale of its plastics packaging business to Britain's Rexam plc.

The ratio stood at 2.2x in 2009 and had crept back up to 2.8x by the end of this year's third quarter as a result of a series of acquisitions the company undertook, including operations in China, Brazil and Argentina, but White said it remains "well below" the 3.95x maximum ratio currently permitted by Owens-Illinois' bank credit agreement.

"We intend to maintain the conservative debt-to-EBITDA ratio between 2x and 3x," he said.

White said that this year, "we've raised debt to fund our growth strategies and refinanced our balance sheet" to produce what he called "a very manageable debt maturity schedule."

The company issued $690 million of 3% exchangeable notes due 2015 in May and issued €500 million of 6¾% notes due 2020 in September. In June, it also redeemed all $450 million of its 8¼% notes due 2013. White noted that while the company had thus increased its total debt by around $800 million this year, cash interest obligations only rose by $25 million, as Owens-Illinois changed its debt maturities "and the quality of our debt."

As of the end of the third quarter on Sept, 30, the company had long-term debt on its books of some $4 billion, but as indicated during the presentation, most of that does not come due until later in the decade.

Owens-Illinois had about $250 million of debt due under its accounts receivable securitization facility this year. It has some bank debt and a little more accounts receivable facility debt coming due in 2011, 2012 and, especially, 2013, when just under $500 million is due.

According to the company's most recent 10-Q report filed with the Securities and Exchange Commission, the first bond maturity is in 2014, when the company must repay $400 million and €225 million of 6¾% notes. The aforementioned exchangeable notes come due in 2015, followed by $584 million of 7 3/8% notes due 2016, €300 million of 6 7/8% notes due 2017 and then the aforementioned 6¾% 2020 notes.

The CFO also reported "excellent" liquidity. As of the end of the third quarter, the company had $724 million available under its global revolving credit facility and $700 million of cash on hand.

"We remain committed to growing our business in a responsible manner and maintaining a healthy balance sheet," he declared.

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