Irish Millionaire Seeks Even More From Surging Junk Bond Market

  • Ardagh's corporate bond sale to price Friday now $4.5 billion
  • Sale will test investor appetite for risky corporate debt

One of Ireland’s richest men is returning to the junk bond market as risky debt comes back into vogue for investors.

Ardagh Group SA Chairman Paul Coulson, known locally as “The Cooler,” is seeking to raise $4.5 billion in euros and dollars to help turn the glass and metal packaging company into the world’s third-largest producer of drinks cans. The deal may price on Friday and was increased from an original target of $2.9 billion, according to a person familiar with the matter. It would follow sales by companies including Peugeot carmaker PSA Group, Fiat Chrysler and EDP Energias de Portugal SA.

Junk bonds posted the best returns since 2012 in March after the European Central Bank laid out plans to start buying corporate debt as part of its quantitative-easing program. While the ECB will only purchase investment-grade securities, it spurred a rally in the high-yield market as investors get increasingly desperate to make money.

“We have seen a rapid turnaround in the market,” said Martin Chamberlain, a senior analyst at Moody’s Investors Service. “A bond launch may not have been so easy a few months ago.”

The average yield on junk notes in euros fell to 4.74 percent on April 22, the lowest since July, from an almost four-year high of 6.55 percent on Jan. 20, according to Bank of America Merrill Lynch index data.

Borrowing to Build

Since taking over the company in the late 1990s, Coulson, 64, used debt to build Ardagh into the largest glass-container maker in northern Europe and second-largest in the U.S. The latest sale of five different bonds -- increased to $3.15 billion of dollar notes and about 1.2 billion euros ($1.35 billion) of euro notes -- will help pay for 22 factories in Europe, the U.S., and Brazil.

The drop in borrowing costs will also encourage Ardagh to refinance some of its high-yield debt, Coulson told analysts last week. Moody’s upgraded the company’s credit rating to B2 from B3 after the latest transaction was announced.

Coulson acknowledges the need to reduce debt, which will rise to 7.7 billion euros after the bond sale. He told analysts last week the company is “actively exploring public and private equity alternatives.” Last year, Ardagh pulled a planned share sale of its metal-containers unit, citing “challenging” conditions for initial public offerings. The improved appetite among debt investors gives Coulson space to breath.

“If the reception for this deal is good, they might favorably weigh the economics of calling some of the high-cost bonds,” said Jayanth Kandalam, a senior credit analyst at Lucror Analytics Pte. in Singapore. “But I will be conservative and not expect an IPO in the next 12 months.”

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