Moody's rates Ardagh notes B3

Moody's Investors Service said it affirmed all ratings of Ardagh Packaging Group plc including its B2 corporate family fating and B2-PD probability-of-default ratings, its senior secured notes ratings at Ba3, its senior notes ratings at B3 and its PIK note rating at Caa1.

The agency also assigned provisional (P)Ba3 (LGD2, 25%) ratings to proposed $750 million equivalent of senior secured notes due 2022 and provisional (P)B3 (LGD5, 76%) ratings to proposed $700 million equivalent of senior notes due 2020. The new notes will be issued by Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. with a dollar tranche and euro tranche each and used to finance the acquisition of Verallia North America. Moody's also assigned definitive Ba3 (LGD2, 25%) ratings to the €520 million senior secured notes due 2017 issued in conjunction with the Anchor transaction in July 2012.

The outlook on all ratings remains negative.

The affirmation of Ardagh's ratings balances Moody's view of the transaction having a compelling strategic rationale and significant positive impact on the group's business profile with Ardagh's highly leveraged financial profile (pro forma debt-to-EBITDA ratio is 7 times) and management's aggressive approach to growing the company, which has so far been entirely debt funded.

Moody's expects Ardagh to moderately reduce its debt load on the back of a recovery in EBITDA following significant restructuring activity. However, the agency expects the group's financial profile to remain weak for the rating category, and the ratings could be downgraded if Ardagh is not be able to improve profitability, if it generates negative free cash flows or if it is unable to reduce leverage toward 6 times.

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