S&P downgrades Ardagh Glass

Standard & Poor's said it lowered its long-term corporate credit ratings on Ardagh Glass Group plc and related entity Ardagh Glass Holdings Ltd. (formerly Ardagh Glass Ltd.) to B from B+ and the group's subordinated bond and pay-in-kind notes to CCC+ from B-. The outlook remains negative.

S&P said the downgrade reflects the ongoing difficult operating environment in Ardagh's main U.K. market, where the group's cost base has been affected by unprecedented high and volatile natural gas prices. With no hedging in place, Ardagh's margins have come under pressure and the agency said it expects this pressure on margins to intensify during 2006 as the U.K. market may suffer overcapacity when a new competitor, Quinn Glass, enters the market.

The ratings on Ardagh also reflect the group's aggressive financial profile, limited diversification and high dependence on the U.K. food and beverages market, the agency said.

These factors are tempered to some extent by the group's leading position and market share in the U.K. market and the fact that a large proportion of Ardagh's business is covered by multi-year contracts varying from one to three years. S&P noted, however, that Ardagh is expected to lose some of these contracts to Quinn Glass in the short to medium term.

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