Due to the “extremely limited short-term visibility” on the economic horizon for the next two quarters, Ineos Group (Lyndhurst / UK; www.ineos.com) has asked its banking syndicate led by Barclays and Merrill Lynch for a waiver of short-term debt covenants related to EUR 7 bn in syndicated loans for the 2005 acquisition of Innovene – see Plasteurope.com of 20.10.2005. In return for the approval of the waiver by a targeted two-thirds of its 230-member lender syndicate until the end of May 2009, Ineos is offering a fee of 50 basis points as well as an increase in interest payment by 100-125 basis points.

In April 2009, the group aims to submit a five-year business plan to the banks and at the same time ask for a longer-term reset of covenants. After building up its petrochemicals empire through acquisition of assets from competitors seeking to shed cyclical businesses, Ineos now hints that it will also consider selling assets to lower the leverage. Its mostly acquisition-related debt is currently four times EBITA.

Although prepared for “normal bottom-of-the-cycle conditions,” CEO Tom Crotty said the UK group was “caught unawares by the global economic downturn,” which had reduced shipments to a third to a quarter. He said customers are closing plants and destocking, a move he called “unprecedented.” Adding fuel to the fire, the collapse in oil prices is expected to result in a full-year inventory loss of around EUR 400m. Inventory write-downs of EUR 100m were taken in Q3. Plants are being run at 70-75% of capacity.

While “waiting for the mists to clear,” Crotty said Ineos will be “battening down the hatches.” Up to the end of 2009, additional annual cost savings of EUR 200m will be sought. Capital spending for 2009 will be lowered to EUR 250m from EUR 600m in 2008. Other measures are planned to improve working capital performance and reduce debt. “There will be job losses,” Crotty said, but these will be mainly among temporary contract workers.

For the first nine months of 2008, Ineos reported a year-on-year sales plus of just over 18% to EUR 24.2 bn, reflecting the pass-through of higher feedstock prices. The nearly 26% fall in EBITDA to just under EUR 1.3 bn is blamed on “unprecedented oil price movements that have suppressed margins.” Earnings also were impacted by the strike at union Grangemouth and flood damage from hurricane Ike as well as adverse foreign exchange movements, the group said.