Capital Restructuring Update. 20 th of March 2017

Transcription

1 Capital Restructuring Update 20 th of March 2017

2 DISCLAIMER This presentation has been prepared by Frigoglass S.A.I.C. (the Company ) for informational purposes only. Neither the Company, its affiliates nor their respective directors, officers, employees or agents (the Company Group ) gives any representation or warranty, express or implied, as to the achievement or reasonableness of future projections, management targets, estimates, prospects, returns, business data or property described in this presentation, if any. This presentation does not constitute an offer, invitation or solicitation by any member of the Company Group to subscribe to or purchase or sell any securities or assets in the United States or in any other jurisdiction, nor any form of commitment or recommendation by any member of the Company Group. This presentation contains forward-looking statements, which are based on current expectations and projections about future events. Forwardlooking statements in this presentation include statements relating to financial guidance for the year ended 31 December 2016, the Company Group s business plan key drivers and financial targets. The financial targets disclosed in this presentation are internal objectives against which the Company s management measures its operational performance, and they should not be regarded as forecasts or expected results or otherwise as a representation by the Company Group or any other person that the Company Group will achieve these targets in any time period. These forwardlooking statements are based on the assumptions mentioned in this presentation and are subject to risks and uncertainties which relate to factors that are beyond management s ability to control or estimate precisely and that could cause actual results to differ materially from those expressed therein. For a more detailed description of the main risks and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements, please refer to Main Risks and Uncertainties in the Board of Directors Report contained in the Company s annual and half year financial statements. In view of the above, you are cautioned not to place undue reliance on these forward-looking statements. The Company Group does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials. The Company reserves the right to change such information without warning. No representation or warranty of any kind is made with respect to the accuracy or completeness of the financial projections or other forward-looking statements, any assumptions underlying them, the Company Group s future operations or the amount of any future income or loss. 2

3 Capital Restructuring Status and Objectives Frigoglass is continuing its negotiations with Ad-Hoc Committee of Noteholders, Core Banks and Boval Objective is to create long-term sustainable Capital Structure: Significant deleveraging Proposed terms would reduce gross leverage (before the 40m new debt funding) by approximately 142m (1) Reinstated gross debt to consist of 120m first lien senior secured debt (including new debt funding) and 139m second lien secured debt (1) Additional liquidity to fund business and restructuring expenses 70m in total consisting of 30m equity contribution from Boval and 40m first lien senior secured debt ( First Lien New Money Debt ) Significantly reduced interest cost Annual interest expense to reduce from 29m to approximately 13m (2) Extension of maturity profile Substantially all debt to be extended for approximately 5 years (1) Amounts assume no participation by Noteholders other than the Ad-Hoc Committee in the First Lien New Money Debt. In case of 100% Noteholder participation, gross debt deleveraging would be 136m and second lien secured debt would be 146m (2) Excluding any interest on the new 40m First Lien New Money Debt which will amount to 2m annually assuming fully drawn 3

4 Proposed Transaction Parameters (1) New Funding Total of 70m to fund working capital, restructuring costs and general corporate purposes o 30m to be provided by Boval in equity contribution (see New Parent Shares ) o 40m in First Lien New Money Debt to be underwritten by the Core Banks and Ad Hoc Committee prorata to their existing debt holdings as of December 31, 2016 (adjusted for further repayments) (50.3%/49.7%) All Noteholders have option to participate in the First Lien New Money Debt pro-rata to their holdings of Existing Notes to the aggregate of Existing Notes and Core Banks Existing Facilities (i.e m) To the extent any Noteholder does not elect to fund its pro-rata share, such share will be funded by the underwriters pro-rata Existing Debt (2) Boval Loan ( 30m) Existing Notes ( 250m) Core Banks Existing Facilities ( 81.5m) (4) Other Opco Loans ( 20.6m) 100% of the 30m Boval Loan to be converted into shares in Frigoglass S.A.I.C. ( Parent Shares ) For each 1,000 of First Lien New Money Debt funded by a Noteholder, that Noteholder will be entitled to exchange 2,000 of principal amount of Existing Notes into 2,000 of First Lien Notes ( Notes Roll-Up ) Remaining Existing Notes (after giving effect to Notes Roll-Up, if any) to be exchanged for 50% in Second Lien Notes and for 50% in Parent Shares (3) For each 1,000 of First Lien New Money Debt funded by Core Banks, the Core Banks will be entitled to exchange 2,000 of principal amount of Existing Facilities into 2,000 of First Lien Facilities ( Bank Roll-Up ) Remaining Existing Facilities (after giving effect to Bank Roll-Up) to be exchanged for 82.5% in Second Lien Facilities and for 17.5% in Parent Shares (3) To remain as is (5) (1) Transaction will be subject to certain conditions precedent and conditions subsequent (2) As of Dec-2016, adjusted for 2.9m of repayments in Q (3) The partial equitization of Existing Notes and Existing Facilities will take effect after giving effect to a discount that will amount to an aggregate of 45m to be allocated pro rata to the amount of debt of Existing Notes and Core Banks Existing Facilities being equitised. To the extent that existing shareholders (other than Boval) take part in the rights issue, proceeds will be used to repay Existing Notes and Existing Facilities reducing the amount of new Parent Shares subscribed by Noteholders and Core Banks, and to stay on the Company s balance sheet thereafter (4) Includes 0.7m of LCs (5) There will be capacity to raise further indebtedness as set out on page 6 4

5 Proposed Transaction Parameters (Cont d) New Parent Shares Intercreditor Governance Accrued Interest to Closing Fees Implementation Existing shareholders will be offered the opportunity to subscribe to new Parent Shares in a rights issue to preserve their full pre-emption rights Boval to acquire new Parent Shares ( 60m) with 30m cash and the 30m Boval Loan and Noteholders and Core Banks to acquire circa 67.4m of new Parent Shares through equitisation of existing debt (1) Equity allocation assuming no take-up in the rights issue other than by Boval to be 44.9% Boval, 47.2% Noteholders, 3.2% Core Banks (1), and 4.6% existing equity (including Boval) (2) Implementation of the issuance of the Parent Shares (including, without limitation, pursuant to a rights issue, conversion or exchange through a convertible instrument) will be agreed between the parties Post-closing dual listing of Parent Shares to be analysed First Lien enforcement rights subject to customary second lien protection and period of standstill Consent from both 50% of First Lien Facilities and 50% of First Lien Notes required subject to 60 days consultation period; thereafter majority of either Notes or Banks can enforce Prepayments to be applied pro rata between Notes and Banks in order of priority Customary turnover, distressed disposal, and loss sharing provisions Arrangements acceptable to creditors in relation to governance No further cash payments until closing; interest to accrue post [March 15, 2017] as if transaction had taken place on [March 15, 2017]; all interest accrued to be paid in cash at closing 100bps underwriting fee on 40m new money commitment to Ad Hoc Committee and Core Banks 60bps on outstanding amount of existing debt held by Core Banks and consenting Noteholders consenting prior to certain dates English scheme of arrangement in relation to Noteholders Contractual arrangements in relation to Core Banks (1) Amounts assume no participation by any Noteholder other than the Ad-Hoc Committee in the First Lien New Money Debt. In case of 100% Noteholder participation, Parent Shares amount for Noteholders and Core Banks would be 60.7m and equity percentages 47.3% Boval, 42.9% Noteholders, 4.9% Core Banks, and 4.8% existing equity (including Boval). To the extent that existing shareholders (other than Boval) take part in the rights issue, proceeds will be used to repay Existing Notes and Existing Facilities reducing the amount of new Parent Shares subscribed by Noteholders and Core Banks, and to stay on the Company s balance sheet thereafter (2) Existing equity allocation of 4.6% is calculated on the basis of 6-month average share price as of 16 March 2017 of

6 Proposed First Lien Debt Terms First Lien Facilities First Lien Notes (1) Providers Core Banks Funding Noteholders Amount Borrower/Issuer Maturity Interest Ranking Guarantors/ Security Use of Proceeds 60.4m (2) (of which 20.1m new money) Senior secured obligations, pari passu among each other Frigoglass Finance B.V. December 2021 E/L % (Euribor/Libor floor of 0) First ranking security. Comprehensive guarantee and security package including asset and share security subject to certain carve-outs for legal, cost benefit or local lender restrictions Support liquidity of the business and fund restructuring fees and expenses 59.6m (2) (of which 19.9m new money) Financial Covenants (3) Minimum liquidity test Net Debt / EBITDA Covenant Annual one-week clean down Cross default on maintenance covenants and clean down of First Lien Facilities Other Key Terms (4) 2m to be paid every 6 months from March 2019; amortisation payment can be deferred for 6 months but if deferred next amortisation payment cannot be deferred Mandatory prepayment under certain circumstances, including change of control and disposals of assets. Other customary LMA covenants Most favoured nation for First Lien Notes and banks Capacity for further debt up to 9m of first lien, 7.5m second lien and other working capital facilities at local subsidiaries Payment - 4m Governing Law English Law (1) Form of Instrument: privately placed note. Company to make reasonable efforts to have notes issued in the Restructuring reviewed by rating agencies (2) Shown figures reflect no participation of any Noteholders other than the Ad-Hoc Committee in the First Lien New Money Debt. In case of 100% Noteholder participation, First Lien New Money Debt split would be 9.8MM by Core Banks and 30.2 MM by Funding Noteholders (3) Financial covenants will be capable of cure by means of cash injections (equity cure) (4) Legal documentation will also include certain reporting and information obligations for the Company and an undertaking to hive down certain contracts to the Dutch subsidiaries 6

7 Proposed Reinstated Second Lien Debt Second Lien Facilities Second Lien Notes (1) Providers Core Banks Noteholders Amount 34.0m (2) 105.1m (2) Borrower/Issuer Maturity Frigoglass Finance B.V. March 2022 Interest Ranking E/L % (0% floor) 2 nd ranking indebtedness, junior to First Lien Debt 7.00% (Fixed) Guarantors/ Security Second ranking security. Comprehensive guarantee and security package including asset and share security subject to certain carve-outs for legal, cost benefit or local lender restrictions Covenants Per First Lien Facilities No financial covenants In line with Existing Notes with additional restrictions Governing Law English Law New York Law (1) Form of instrument: listed high yield bond (2) First Lien New Money Debt split between bank facilities and new notes dependent on participation of existing Noteholders in the First Lien New Money Debt. Shown figures reflect assumed participation of c. 32% of the Noteholders, i.e. the members of the Ad Hoc Committee who have committed to fund. In case of 100% participation, reinstated Second Lien Debt would be split into 51.0m from Core Banks and 94.8m from Noteholders 7

8 Additional Disclosure 8

9 Capital structure as of 31-Dec-16 (1) (in m) Amount as of Q4 Average Interest Rate Bond (2) % Total Holding Company (3) Debt (4) % Total Operating Company Debt % Total Debt 384 Cash (58) Net Debt 327 (1) Based on unaudited figures (2) Face value (3) Refers to Frigoinvest Holdings B.V. and Frigoglass Finance B.V. (4) Includes 30m of Boval Loan 9

10 FY 2016 outlook ICM Operations Drivers Sales: - Weak economic conditions in Russia - Reduced customers capex in Asia - Increased sales in W. Europe (ICOOL) - Solid Service business performance EBITDA margin: - Cost under-absorption - Service business growth - Favorable geographical mix - One-off bad debt provision Glass Operations Drivers Sales: - Naira devaluation & negative macro environment - Pricing initiatives in Nigeria - Volume growth in Glass Nigeria - Lower volume in Plastic Crates - Lower demand in Dubai business - Lower full-year Other Income vs FY 2015 EBITDA margin: - Opex reduction Other Drivers - c. 3m restructuring expenditure expected in Q4 ICM Operations (in m) FY16 FY15 Sales EBITDA EBITDA margin 5.2%-5.8% 6.7% Glass Operations (in m) FY16 FY15 Sales EBITDA EBITDA margin 19.2%-20.0% 23.1% Group (in m) FY16 FY15 Sales EBITDA EBITDA margin 9.3%-10.0% 11.6% 10

11 Management rationale on FY financial targets Historical market shares and financial performance Recent macroeconomic and currency trends External strategic advisor analysis on market trends Feedback from customers Customers published plans in key markets Management initiatives already undertaken (Service, new products, manufacturing footprint, operational structure & expenses, working capital) Further management initiatives planned for the period 11

12 Business Plan key drivers Sales EBITDA ICM Gain market share in Coca-Cola bottlers through ICOOL s roll-out in Europe Integrated service offering roll-out in Europe for Coca- Cola Hellenic Innovation: new product launches (new range for breweries, Digital Services, Hybrid Cooler) Exit from Chinese market Operating leverage Productivity improvements across all plants Leverage service network to expand margin Favourable geographical sales mix Effect of US shutdown Glass Volume increase in Beta Glass (Nigeria) to capture market growth/modest capacity increase through cold repairs Pricing in Nigeria to absorb cost inflation Volume leverage Improved production efficiencies, higher utilization and energy related savings 12

13 Cool Operations FY management targets and corresponding assumptions c. 3.5% sales CAGR in the period Assumptions: Partial recovery of sales in East Europe, compared to FY13 level Increased sales to brewery customers and Service business Growth in West Europe driven by market share gain in Coca-Cola bottlers through ICOOL and Service business Increased Service business sales following Integrated Service system roll-out in Europe Sales in Asia to remain broadly stable throughout the period despite the impact from the discontinuation of manufacturing operations in China No sales assumed in US EBITDA margin improvement in FY , driven by Assumptions: Volume leverage and favourable geographic mix Better absorption of fixed costs driven by manufacturing footprint rightsizing Higher capacity utilisation following closure of China plant Productivity improvement across plants Leverage Service network to improve margin Operating expenses reduction due to efficiency measures and China s manufacturing discontinuation related savings Cumulative capital expenditures of 50-55m in FY Assumptions: Maintenance capital expenditure of c. 10m p.a. ERP system implementation related spending of 10-12m in FY

14 Glass Operations FY management targets and corresponding assumptions c. 10% sales CAGR in the period Assumptions: Demand for glass in West Africa is expected to continue growing Customer base expansion in Nigeria to other market segments Price increases to partially absorb cost inflation driven by Naira devaluation Customer base expansion in Frigoglass Jebel Ali EBITDA margin decline in the short-term; assumes recovery by FY 2020 Assumptions: Naira devaluation impacting cost base in the short-term; partly offset by price increases Better absorption of fixed cost driven by higher volume Improved furnace efficiency in Nigeria and Dubai Cumulative capital expenditures of 45-50m in FY Assumptions: Three furnace cold repairs and related machinery of c m in the period Two furnace cold repairs in Nigeria Assumes EUR/Naira rate at 375 throughout the period 14

15 FY other recurring cash flow items assumptions Net Trade Working capital as a % of Group sales at 27-28% p.a. September-end Net Trade Working Capital as a % of Group LTM sales at c. 28% Taxes are highly dependent on the jurisdictions in which profits are generated; given the expectation of business mix of profits being geared towards higher tax rate jurisdictions (such as Nigeria and Russia) and limited benefit of tax shield, cash taxes are assumed at c m p.a. c m bank charges and foreign exchange hedging costs p.a. 15

16 Basis of management s outlook Nigeria and Russia have historically rebounded strongly from crises Despite slowdown, macroeconomics in our key markets are favorable West Europe s recovery underway ICM s criticality to beverage industry s growth and profitability Frigoglass remains leader in ICM market Frigoglass remains only large glass manufacturer in Nigeria where importation bans are expected to persist for the foreseeable future Management has already undertaken numerous initiatives that are anticipated to pay off significantly as soon as volume increases from current levels Top management team renewed and refocused Swift resolution of Company s capital structure issues 16

17 Business is macro-driven Management pledges to deliver targets under its own control: Productivity & Quality improvement Innovation Operating expenses Inventory optimization The success of business plan is dependent on: Improved macroeconomics Consumer behavior Beverage industries spending on capex High degree of uncertainty in achieving FY targets 17