Owens-Illinois keeps deleveraging, extends, expands credit agreement

By Devika Patel

Knoxville, Tenn., July 24 – Owens-Illinois, Inc. finalized terms of a credit agreement in June, extending the maturity and increasing revolver capacity by $100 million, and plans to continue deleveraging, management says.

“We continue to proactively manage our debt structure,” senior vice president and chief financial officer Jan Bertsch said on the company’s second quarter ended June 30 earnings conference call on Tuesday.

“In late June, we finalized our five-year bank credit agreement, achieving all of our key objectives, including reducing our refinancing risk by extending the maturity date out to 2023, increasing liquidity by adding $100 million of capacity to our revolver, reducing our borrowing costs by securing a lower spread to Libor across the pricing grid and ameliorating credit risk by securing better terms and conditions, including an uptick in the leverage ratio covenant,” Bertsch said.

The company may now borrow debt in foreign currencies.

“Another important element of our bank credit agreement is the ability to borrow outside of the U.S. and Europe because local borrowing is a natural hedge to translation risk,” Bertsch said.

“A few years ago, nearly three-quarters of our debt was in U.S. dollars.

“Now, about half of our debt is denominated in other currencies,” Bertsch said.

Management favors fixed-rate interest rates over floating rates.

“Of course, we continue to intentionally manage our fixed-float ratio, generally favoring fixed-rate debt especially at rates we’ve seen over the past two years,” Bertsch said.

The company plans to keep reducing leverage.

“We will continue to deleverage,” Bertsch said.

Cash and cash equivalents were $365 million as of June 30, 2018, compared to $492 million as of Dec. 31, 2017 and $335 million as of June 30, 2017.

Owens-Illinois is a Perrysburg, Ohio-based glass container manufacturer.

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