Investing.com -- On March 11, 2025, Ardagh Group S.A., the Luxembourg-based metal and glass packaging producer, announced two restructuring proposals that are currently under review by creditors. As no agreement has been reached yet and discussions are ongoing, S&P Global Ratings has lowered the long-term issuer credit ratings of Ardagh Group S.A., ARD Finance S.A., Ardagh Packaging (NYSE: PKG ) Holdings Ltd., and Ardagh Packaging Group Ltd. from ’CCC-’ to ’CC’. The ratings of Ardagh Metal Packaging Finance PLC and its debt remain unchanged.

The ratings agency also downgraded the issue ratings on the senior secured notes co-issued by Ardagh Packaging Finance PLC and Ardagh Holdings USA Inc. to ’CC’ from ’CCC-’. However, the issue rating on ARD Finance S.A.’s $1.8 billion deeply subordinated payment-in-kind (PIK) toggle notes and the senior unsecured notes co-issued by Ardagh Packaging Finance PLC and Ardagh Holdings USA Inc. remains ’C’.

These actions reflect S&P’s view that Ardagh’s capital structure is unsustainable due to its four-year history of negative free operating cash flow and a high debt burden. These factors are seen to weaken the refinancing prospects for the group’s $2.5 billion notes due in August 2026. The company is currently exploring debt restructuring options with its creditors.

S&P believes that the ongoing discussions are likely to result in a distressed restructuring transaction. Both restructuring proposals suggest that most of Ardagh’s existing senior secured and senior unsecured noteholders are likely to receive less than originally promised. Certain creditors, such as the lenders to Ardagh Investments Holdings Sarl, are expected to be repaid at par.

The negative outlooks on Ardagh and certain subsidiaries indicate a potential further lowering of ratings if the group agrees to a distressed restructuring proposal with creditors. Once the refinancing transaction is complete, S&P expects to lower its issuer credit rating on Ardagh Group S.A., ARD Finance S.A., Ardagh Packaging Holdings Ltd., and Ardagh Packaging Group Ltd., to ’SD’. The issue credit ratings on the senior secured and senior unsecured notes may also be lowered to ’D’. The company’s new rating will be based on S&P’s assessment of its business plan and its credit metrics under the new capital structure.

The stable outlook on Ardagh Metal Packaging Finance PLC reflects S&P’s expectation that any selective default at Ardagh Group would not significantly pressure its rating. However, contagion risk is possible, particularly regarding the sensitivity and confidence of capital markets toward Ardagh Metal Packaging.

S&P could lower its issuer credit rating on Ardagh Metal Packaging Finance PLC if there is an increased risk of Ardagh Group not being able to refinance its senior secured notes due in 2026 at an affordable price. This could in turn heighten negative market sentiment regarding Ardagh Metal Packaging.

Given the ongoing restructuring negotiations, S&P sees any upside to the ratings as highly unlikely. However, the issuer credit rating on Ardagh Metal Packaging Finance PLC could be raised if Ardagh Group refinances its senior secured notes due in 2026, and Ardagh Metal Packaging maintains positive cash flow and further reduces its leverage.

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