M&G Chemicals
New Coverage: Mossi & Ghisolfi Looks for Financial Partner to Complete Corpus Christi Texas Plant, Working on Capital Structure Overhaul as M&G Chemical May File for Chapter 11; Coupon Payment on Hybrid Bond Suspended
Fri 10/13/2017 09:07 AM
Relevant Documents:
M&G Finance Luxembourg SA 2049 Bond Prospectus
Mossi & Ghisolfi Spa 2016 report
Italian chemical group Mossi & Ghisolfi is planning an overhaul of its capital structure. The company is facing increasing development costs at its Corpus Christi, Texas, plant, which has caused a 32% increase in debt to €1.8 billion in 2016 and has pushed the company into a restructuring process. Given Mossi’s inability to continue financing the plant, M&G Chemical, the U.S. subsidiary, could file for chapter 11 and look for a financial partner that can help complete the plant, sources told Reorg Research.
The company’s restructuring is articulated over two main geographies and there are two sets of advisors. Rothschild, Jones Day and Alvarez & Marsal are assisting on the international side, while Mediobanca and Gianni Origoni Grippo are working on the Italian negotiations.
The company started working on the development of its U.S. plant back in 2010-'11, when following the recession cost of work was very low. The strong recovery in the United States, lowering unemployment close to 4%, has caused an increase in the cost of labor, which goes beyond the company’s most pessimistic expectations and has caused the liquidity shortfall.
The consolidated company’s corporate structure is shown below, and a more detailed capital structure highlighting all the foreign subsidiaries is HERE:
To shore up liquidity, at the end of September the company suspended the quarterly coupon payment on its 2049 perpetual bonds. There is about €70 million of the notes outstanding, mainly in the hands of international funds such as Invesco and Pioneer among others. A large portion of the bonds was bought back years ago.
In a restructuring, the bonds would face a low recovery given they are deeply subordinated, sources said. Under the bond documentation, the company can suspend payment under certain conditions.
The company is also considering selling its Italian business in the biofuels sector as part of a restructuring deal, according to press reports. The company, Italy’s second-biggest chemicals business behind that of oil group Eni, is working with Mediobanca on the process.
On the Italian side, debt amounts to about €200 million and the negotiations will be with banks including Unicredit, Banco BPM andIntesa Sanpaolo. On the international side, BoFA and Deutsche Bank are among the creditors.
In 2016 M&G Group suffered a slowdown with EBITDA falling to €83.4 million from €141.1 million in 2015. Revenue was €1.7 billion, flat on €1.76 billion in 2015. EBITDA was affected by the extra costs for the Corpus Christi plant development. Depreciation and amortizations were stable at €71 million.
The company had net debt of €1.81 billion, up from €1.22 billion in 2015. This was due mainly to more investments in the Corpus Christi plant for €499 million. At the end of 2016, the company had €106 million cash, deposits and other current financial activities, €97 million of which is available liquidity, down from €123.9 million in 2015.
M&G Finanziaria Spa agreed to finance extra costs to M&G Chemical SA over the original amount of $1.15 billion.
Under the “Cost Overrun and MakeUp Agreement” signed with M&G Chemical SA on Jan. 14, 2015, and amended in December 2015 and February 2017, M&G Finanziaria had to finance the extra costs sustained by M&G Chemical for an amount estimated at $335 million through capital injections.
At the end of the year, M&G Finanziaria Spa injected €30 million into M&G Chemical, while an additional injection of the same amount came from M&G Capital Sarl in February 2016. All the money came from the parent Mossi & Ghisolfi, which lent €60 million in a financing with a three-year maturity to M&G Finanziaria Spa to use for the Corpus Christi obligations.
This means that M&G Finanziaria Spa or its subsidiaries had to make a $275 million injection in 2017.
M&G Finance Luxembourg SA 2049 Bond Prospectus
Mossi & Ghisolfi Spa 2016 report
Italian chemical group Mossi & Ghisolfi is planning an overhaul of its capital structure. The company is facing increasing development costs at its Corpus Christi, Texas, plant, which has caused a 32% increase in debt to €1.8 billion in 2016 and has pushed the company into a restructuring process. Given Mossi’s inability to continue financing the plant, M&G Chemical, the U.S. subsidiary, could file for chapter 11 and look for a financial partner that can help complete the plant, sources told Reorg Research.
The company’s restructuring is articulated over two main geographies and there are two sets of advisors. Rothschild, Jones Day and Alvarez & Marsal are assisting on the international side, while Mediobanca and Gianni Origoni Grippo are working on the Italian negotiations.
The company started working on the development of its U.S. plant back in 2010-'11, when following the recession cost of work was very low. The strong recovery in the United States, lowering unemployment close to 4%, has caused an increase in the cost of labor, which goes beyond the company’s most pessimistic expectations and has caused the liquidity shortfall.
The consolidated company’s corporate structure is shown below, and a more detailed capital structure highlighting all the foreign subsidiaries is HERE:
To shore up liquidity, at the end of September the company suspended the quarterly coupon payment on its 2049 perpetual bonds. There is about €70 million of the notes outstanding, mainly in the hands of international funds such as Invesco and Pioneer among others. A large portion of the bonds was bought back years ago.
In a restructuring, the bonds would face a low recovery given they are deeply subordinated, sources said. Under the bond documentation, the company can suspend payment under certain conditions.
The company is also considering selling its Italian business in the biofuels sector as part of a restructuring deal, according to press reports. The company, Italy’s second-biggest chemicals business behind that of oil group Eni, is working with Mediobanca on the process.
On the Italian side, debt amounts to about €200 million and the negotiations will be with banks including Unicredit, Banco BPM andIntesa Sanpaolo. On the international side, BoFA and Deutsche Bank are among the creditors.
In 2016 M&G Group suffered a slowdown with EBITDA falling to €83.4 million from €141.1 million in 2015. Revenue was €1.7 billion, flat on €1.76 billion in 2015. EBITDA was affected by the extra costs for the Corpus Christi plant development. Depreciation and amortizations were stable at €71 million.
The company had net debt of €1.81 billion, up from €1.22 billion in 2015. This was due mainly to more investments in the Corpus Christi plant for €499 million. At the end of 2016, the company had €106 million cash, deposits and other current financial activities, €97 million of which is available liquidity, down from €123.9 million in 2015.
M&G Finanziaria Spa agreed to finance extra costs to M&G Chemical SA over the original amount of $1.15 billion.
Under the “Cost Overrun and MakeUp Agreement” signed with M&G Chemical SA on Jan. 14, 2015, and amended in December 2015 and February 2017, M&G Finanziaria had to finance the extra costs sustained by M&G Chemical for an amount estimated at $335 million through capital injections.
At the end of the year, M&G Finanziaria Spa injected €30 million into M&G Chemical, while an additional injection of the same amount came from M&G Capital Sarl in February 2016. All the money came from the parent Mossi & Ghisolfi, which lent €60 million in a financing with a three-year maturity to M&G Finanziaria Spa to use for the Corpus Christi obligations.
This means that M&G Finanziaria Spa or its subsidiaries had to make a $275 million injection in 2017.
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