Global Packaging Sector Quarterly: Cross-Border Megadeals Return; Destocking, Inflationary Pressures Ease in US; Manageable Refi Risk Despite Lower Valuation Multiples; Exceptions Are High-Beta Issuers Ardagh, Kloeckner Pentaplast

EMEA Credit Research: Cedrick Cassin Americas Credit Research: Michael Axon Relevant Items: U.S. Packaging Sector Update April 2024 Ardagh Uptier Exchange April 2024   Key Takeaways   In this sector update, we highlight the reemergence of cross-border megadeals and the waning of inventory destocking pressure on the sector. Increasing M&A activity likely reflects the generally stable cash flow of the sector, easing inventory destocking and inflationary pressures on consumers, and lower valuation multiples, given sharp increases in funding costs since the end of 2021.   The main price mover among the U.S. packaging names was Ardagh Holdings and the ultimate parent company, Ardagh Finance, after the Apollo uptier transaction announced in mid-April. The transaction pushed out the company’s first maturity until 2026 from 2025, while providing the ability to issue up to another $250 million of exchange bonds for either the Ardagh Holdings senior notes or the Ardagh Finance PIK toggle notes at discounted prices. The ratings agencies downgraded Ardagh after the announcement. We continue to believe the main risk is the company being able to refinance its debt, given sharply higher funding costs.   Across the pond, plastic packaging producer Kloeckner Pentaplast has dominated headlines in recent weeks as[...]