UK: Rexam seeks finance to avoid downgrade

By just-drinks.com editorial team | 28 July 2009

Rexam, the drinks packaging giant, is seeking fresh ways of raising finance to avoid losing its investment grade credit rating.

A share rights issue is one of several options being considered, said the beverage can producer yesterday (27 July).

"The risk of a downgrade to sub investment grade has significantly increased and has now become unacceptably high," said Rexam.

A downgrade would increase the cost of future borrowing and restrict the company's access to credit.

Tough trading conditions have put Rexam's credit rating in doubt.

The firm said: "With the Board now seeing no upturn in current trading conditions through 2009, management has launched a number of significant cost saving initiatives and is considering others which, with those already announced, will have a material benefit on Rexam's performance in 2010. However the absence of upturn will reduce Rexam's ability to generate significant free cash flows to pay down debt in 2010."

Rexam said that it expects that half-year results, to be announced on 30 July, will meet market expectations, despite no improvement in trading in recent months.

"Covenant headroom remains comfortable, with net debt to ebitda of 2.6 times at the half-year and well below the principal debt covenant of 3.5 times," said the group.

Sectors: Beer & cider, Soft drinks

Companies: Rexam