Restructuring specialists are circling Ineos Group, Britain's biggest private company, as the chemicals manufacturer struggles with its €7.3bn (£6.1bn) debt burden.
Jim Ratcliffe, the chairman and the country's 25th-richest man, has called in PricewaterhouseCoopers (PWC) to provide a business plan and revised debt repayment terms by the end of the first quarter of next year.
Lazard, the investment bank, is negotiating with lenders to waive its debt covenants over the next two quarters. Severely declining petrochemicals prices have left Ineos in danger of breaching its loan conditions. The £29bn-turnover group must secure the agreement of two-thirds of its 230-strong syndicate of lenders, which include banks and hedge funds, for the deal to go ahead. Core banks Merrill Lynch and Barclays have already agreed.
Petrochemicals consultant CMAI is drawing up "a state of the industry report", according to a sector source. This is expected to be used to help justify PWC's plan. Lenders are also approaching restructuring specialists to help them get the best terms possible from Ineos.
The London office of Houlihan Lokey, the US middle-market investment bank, is understood to have been approached by both bondholders and lenders to advise them.
Ineos, which claims to be the world's third-biggest chemicals company, announced its third-quarter results last Monday. Earnings before interest, taxes, depreciation and amortisation – a company's key profit indicator – were €1.3bn in the nine months to 30 September, down €400m on the first three quarters last year.
The company blamed the losses on factors including storm damage at US facilities caused by Hurricane Ike, and a strike at its Grangemouth oil facility in Stirlingshire. The two-day walkout over pensions in April caused the closure of a BP pipeline that supplies nearly a third of the UK's oil. Falls in oil prices are expected to dampen the value of its petrochemicals holdings in the fourth quarter this year.
Chief finance officer John Reece said: "We have already begun the process of optimising our cash flows by reducing fixed costs further, curtailing capital expenditure and improving our working capital ratios. We expect to deliver €60m of fixed- cost savings as early as Q4 this year."
A restructuring source said that stabilising the business would not be simple. He added: "Ineos has a lot of operational issues."
Ineos employs 16,000 staff at 70 manufacturing sites in 14 countries. Also the company's founder, Mr Ratcliffe is said to be holding one-to-one meetings with the company's investors to ensure that the two-quarter covenant waiver wins approval.Reuse content