Ardagh Group – Taking stock - Positioning
All,
Please find our unchanged analysis here.
We think Ardagh Group's (ARGID) restructuring is coming soon. Our positions in ARGID and Ardagh Metal Packaging have done well, and we want to take some of our profit on the trade. We still see fair value for the ARGID suns as nearer to 40c/$, and we will revisit our positioning when the restructuring proposal is out.
Investment Rationale:
- We are currently short the ARGID 5% $800m SUNs for 5% NAV and long the AMP 3% SUNs for 3% NAV. We will retain a short for 2% of NAV. We are reducing our short to 2% of NAV which has earned a +10.3% return annualised. We are also exiting our 3% AMP long which has generated a return of 14.1%. The SUNs trade 18 points above our estimate of fair value. The downside is eight points if the restructuring is more generous to SUNs holders than we expect.
- We are exiting our 3% NAV position in the AMP SUNs, earning us an annualised return of 14.1%. The current YTW is 7% so we see limited upside to the trade unless the restructuring of ARGID is not consensual and there is a CoC at AMP (101 put). We consider a non-consensual restructuring to be unlikely.
The catalyst for restructuring hasn’t happened yet:
- The sale of Trivium packaging is necessary to provide much of the cash for the amend and extend operation that will be part of the restructuring of ARGID’s debt.
- The PE bidders know Ardagh needs the sale to go through so will not be generous with pricing, but Ontario Teachers’ Pension Plan holds 58% of Trivium, and it is not an incentivised seller. We expect a deal to happen by Q225.
Aengus
T: +44 203 744 7055