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Rating Action:

Moody's affirms Ardagh's B2 rating upon announcement of Impress acquisition -- outlook positive

28 Sep 2010

Approximately EUR2.7 billion of rated debt affected

Frankfurt am Main, September 28, 2010 -- Moody's Investor's Service today affirmed the Corporate Family Rating (CFR) and Probability of Default Rating (PDR) for Ardagh Glass Group plc at B2 and assigned provisional ratings to the financing of the announced acquisition of Impress Coöperative U.A.. The outlook has been changed to positive from stable.

The proposed Senior Secured Notes (EUR850 million and USD375 million, 7 years) have been assigned a provisional (P)Ba3 rating. The proposed Senior Unsecured Notes (EUR315 million and USD310 million, 10 years) have been assigned a provisional (P)B3 rating. The ratings of Ardagh's existing senior secured notes (EUR300 million due 2016) have been affirmed at Ba3, the senior unsecured notes (EUR310 million due 2017 and EUR180 million due 2020) have been affirmed at B3 and the rating for the PIK note (EUR126.5 million due 2015) has been affirmed at Caa1. Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavor to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

The affirmation of the B2 CFR reflects Ardagh's strong operating performance over the last quarters, which has been ahead of expectations and resulted in some headroom in the current rating category prior to the acquisition announcement. In addition, the affirmation reflects the positive impact of the acquisition on Ardagh's business profile, given Impress' complimentary product portfolio of metal cans, with a strong focus on the defensive food industry and a wide geographic spread with operations in Europe, North America and Australasia. Moreover, we would expect customer concentration to reduce considerably following the acquisition, a concern currently incorporated into Ardagh's rating.

At the same time, this acquisition will result in increased pro forma leverage ratios of approximately 5.5x debt/EBITDA as adjusted by Moody's on an LTM basis per June, which however remains in line with the requirements for the B2 rating category. Furthermore, Moody's notes the execution and integration risks inherent in such a transformational acquisition as well as certain aggressiveness in the financial policy as the purchase price consideration will be fully debt financed.

The positive outlook is based on Moody's expectation that the enlarged group should be able to reduce leverage towards levels of 5x debt/EBITDA over the next 12-18 months on the back of ongoing cost savings initiatives, potential synergies and the application of positive free cash flows to net debt reduction. The positive outlook also incorporates Moody's expectation that the enlarged group will continue to tightly manage production volumes and prudently control volatile input costs without compromising current profitability levels as well as the preservation of an adequate liquidity profile including sufficient leeway under financial covenants. The ratings could be upgraded over the next 12-18 months should Ardagh manage to bring down leverage in terms of Debt/EBITDA towards 5 times and keep interest coverage in terms of (EBITDA-Capex)/Interest around 1.5x on the back of improvements in operating profitability and continued positive free cash flow generation.

Moody's understands that Ardagh plans to acquire Impress for a total consideration of EUR1.7 billion including the repayment and assumption of existing debt at as well as fees and expenses which values the transaction at around 6x June LTM adjusted EBITDA. The transaction is still subject to regulatory approval, but is expected to close in late 2010.

Ardgah plans to finance the acquisition with the issuance of (i) EUR850 million and USD375 million Senior Secured Notes and (ii) EUR315 million and USD310 million Senior Notes. The proceeds of EUR1.7 billion together with about EUR136 million of existing cash balances and initial drawings under a new EUR200 million revolving credit facility are planned to be used to finance (i) EUR380 million consideration for the equity of Impress Coöperative U.A, (ii) the repayment of EUR 1.13 billion of existing Impress net debt, (iii) EUR214 million repayment of existing bank debt at Ardagh and (iv) to cover transactions fees and expenses.

The provisional instrument ratings are based on indicative terms and conditions received so far according to which (i) the proposed Senior Secured Notes benefit from the same guarantors and security package as Ardagh's existing Senior Secured Notes (EUR 300mn, due 2016), and (ii) the proposed senior unsecured notes benefit from the same guarantee package as Ardagh's existing senior unsecured notes (EUR310 million, due 2017 and EUR180 million, due 2020).

Ardagh's existing senior secured notes are supported by senior guarantees of subsidiaries representing at least 85% of consolidated assets and EBITDA and security interests which we understand comprise the clear majority of the guarantors' assets. While Ardagh's senior unsecured debt is supported by guarantees from the same entities that guarantee the senior secured debt, it does not benefit from any tangible collateral. Following the closing of the acquisition, we understand that material operating subsidiaries of the acquired business will become providers of upstream guarantees and collateral as are current material subsidiaries of Ardagh.

Downgrades:

..Issuer: Ardagh Glass Finance plc

....Senior Subordinated Regular Bond/Debenture, Downgraded to LGD5, 77% from LGD5, 73%

....Senior Secured Regular Bond/Debenture, Downgraded to LGD2, 29% from LGD2, 23%

....Senior Unsecured Regular Bond/Debenture, Downgraded to LGD5, 77% from LGD5, 73%

..Issuer: Ardagh Glass Group PLC

....Senior Unsecured Regular Bond/Debenture, Downgraded to LGD6, 95% from LGD6, 93%

Assignments:

..Issuer: Ardagh Packaging Finance plc

....Senior Secured Regular Bond/Debenture, Assigned a range of 29 - LGD2 to (P)Ba3

....Senior Unsecured Regular Bond/Debenture, Assigned a range of 77 - LGD5 to (P)B3

Outlook Actions:

..Issuer: Ardagh Glass Group PLC

....Outlook, Changed To Positive From Stable

Moody's last rating action on Ardagh was on 13 January 2010 when we affirmed the B2 CFR with a stable outlook and assigned a B3 rating to the company's new EUR 180 million Senior Notes due 2010.

The principal methodology used in rating Ardagh Glass Group plc was Global Packing Manufacturers: Metal, Glass, and Plastic Containers rating methodology published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Ardagh Glass Group, registered in Ireland, is a leading supplier of glass containers by volume in Northern Europe, in particular in Germany, the UK, Scandinavia, Poland and the Benelux region. In the last twelve months ending June 2010, Ardagh generated sales of EUR 1.25 billion.

Incorporated in Deventer, The Netherlands, Impress is among the largest European metal packaging manufacturers, holding market leading positions in several metal packaging segments e.g. for seafood packaging globally and being the largest producer of paints, decorative tins and aerosols in Europe and ranking number two in Europe for heat-processed food packaging. Impress generated sales of EUR 1.8 billion in the last twelve months ending June 2010.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Frankfurt am Main
Anke Rindermann
Analyst
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany

Moody's affirms Ardagh's B2 rating upon announcement of Impress acquisition -- outlook positive
No Related Data.
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