Moody’s gives Ardagh B1, notes Ba2, B3

Moody’s Investors Service said it assigned a first-time B1 corporate family rating and B1-PD probability of default rating to Ardagh Metal Packaging SA. Concurrently, Moody’s assigned a Ba2 rating to the proposed $1.15 billion equivalent guaranteed senior secured notes due 2028 and a B3 rating to the proposed $1.5 billion equivalent guaranteed senior unsecured notes due 2029, both to be co-issued by Ardagh Metal Packaging Finance plc and Ardagh Metal Packaging Finance USA LLC.

“The B1 rating is currently weakly positioned in light of the company’s high gross leverage and the expectation of negative free cash flow for the next two years, which will add pressure on liquidity. The rating is constrained by AMP’s business concentration in terms of product offering, end-market and customer base, the execution risk associated with its $1.8 billion growth plan including the risk of industry overcapacity with negative effect on prices and profitability,” said Donatella Maso, a Moody’s vice president, and lead analyst for AMP.

“At the same time, the rating is supported by AMP’s leading position in the consolidated but equally competitive metal beverage can industry, and potential for significant earnings growth supported by contracted capacity additions and positive demand trends for beverage cans,” added Maso.

The Ba2 rating assigned secured notes is two notches above the CFR, mainly reflecting the significant debt ranking junior to the notes. The B3 rating assigned to the unsecured notes is two notches lower than the CFR, reflecting their subordination to the sizeable amount of senior secured debt that ranks ahead, Moody’s said.

Proceeds will be used to provide cash consideration to Ardagh Group SA, for general corporate purposes and to pay fees and expenses related to the transaction.

The outlook is stable. Moody’s noted the company is initially weakly positioned in the B1 rating category and it expects AMP to build capacity within its rating over time and to improve its liquidity.

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