* New terms will provide space on leverage, interest cover
* UK chemicals firm offers lenders extra fees, interest
* Wider debt restructuring not needed - finance director
By Tom Freke
LONDON, June 25 British chemicals firm Ineos
Group [INEOSP.UL] has asked lenders for more headroom on its 7.5
billion euro ($10.5 billion) debt after securing backing for new
terms from some of its biggest debtholders.
The privately held company said on Thursday it had asked its
loan syndicate to approve the new terms. In exchange, the
company is offering lenders extra fees and a sharp hike in
Ineos, one of Europe's largest privately-owned companies,
has been in discussions with lenders since the end of last year
after it ran close to breaching its covenants.
The new proposals would give the company additional space on
its leverage, interest cover and debt service cover covenants,
the company said in a statement.
John Reece, Ineos chief financial officer, said the measures
would give the company more headroom, "which is consistent with
our new business plan and the current economic uncertainty".
Reece told Reuters that more extreme debt reduction methods,
as had been suggested by some analysts, were unnecessary given
the company's present performance.
"Any sort of debt restructuring wouldn't make sense given
where the company is, and what the business plan says about the
prospects for the company," Reece said.
Responding to recent reports that Ineos may offload its
holding in Scotland's Grangemouth refinery, Reece said
discussions about a potential sale were "pretty preliminary".
The covenant reset plan has the backing of a "sounding
group" of lenders, a seven-strong group of banks and funds that
represent Ineos's 230-strong syndicate of lenders.
Lenders have until July 15 to approve the new debt terms,
two days before a covenant waiver runs out. [ID:nLR43332]
In exchange for approving the new terms, lenders will
receive a 2 percentage points higher interest rate on their debt
as well as fees totalling 1 percent.
However, the extra interest rate will be "rolled up" and
paid when the loans mature, with the first maturity in 2012.
Reece said the delay to the interest payment was because
"cash is king" at the moment.
Much of Ineos's debt dates from February 2006 to back its 5
billion pound ($8.13 billion) acquisition of Innovene from BP
(BP.L). The majority of its loans now pay between 2.25 percent
and 2.75 percent over Libor.
In the last two years the chemicals industry has been hit by
a sharp downturn in sales, as well as volatility in the price of
Ineos was caught out by the big fall in the price of oil
alongside the economic downturn in the last three months of
2008, Reece said.
"January was probably the bottom of the cycle and each month
since then has seen a gradual improvement, certainly over the
last two or three months," Reece added.