Anchor Glass customer pullback continues to weigh down EBITDA, loan trading levels

Anchor Glass Container’s 3Q18 EBITDA fell 19% year-over-year as revenue declined by 9%, said three sources familiar with the matter. The company is still feeling the residual effects from 2Q18 headwinds, especially the loss of volume from one its major customersDr Pepper Snapple Group, two of the sources said.

The volatility has spread into the CVC Capital Partners-owned company’s loans. Anchor’s USD 647m Libor+ 275bps (1% floor) TLB due 2023 is quoted in the 87.25/88.5 context today, down from 88.806/90.083 on 14 November, according to Markit. Its USD 150m L+ 775bps (1% floor) second lien TL due 2024 moved down a touch to 65.143/69.143 from 65.429/69.286 before the earnings, but up from the 62.25/65.375 context after the company reported 2Q18 earnings.

Management said on its recent 3Q18 earnings call that it expects to partially recover the lost capacity that was previously designated for Snapple, which has been packaging more of its drinks in plastic. The guidance for only a partial recovery from Snapple losses marked a shift from previous management comments that the company will recapture 100% of lost volume, two sources said.

Anchor reported USD 29m of EBITDA for 3Q18, down 19% from USD 36m booked in the prior-year period, primarily driven by lower volumes and lower revenue, the sources said. The company generated USD 142m of revenue, down 9% from USD 156m, two of the sources said.

Volumes fell 13% to 250 tons shipped from 287 tons shipped in 3Q17. That weakness was partially offset by an increase in prices, two of the sources said.

“The price has been up in the past quarters, but volumes keep going down, and there is a limit of how much price can go up,” the second source said.

Volumes in the quarter were also affected by the fire at one of the plants in May. The plant is now 80% operational, according to one of the sources.

Anchor Glass gave capex guidance for fiscal year 2018 at USD 55m – USD 65m, up from an expected roughly USD 50m of capex, a source said. A portion of the increased capex is expected to be financed by insurance proceeds from the fire and other incidents.

The company also expects for fiscal year 2019 capex guidance to be higher, including the expenses to make its equipment more environmentally friendly in compliance with the EPA settlement.

Liquidity as of 30 September stands at USD 127m with USD 7m in cash and an undrawn USD 120m ABL due 2021, according to two of the sources.

Based on USD 117.4m of LTM EBITDA and USD 789m of total debt, the company is levered 6.7x, the first source said. Excluding a USD 11.4m EBITDA addback for closed capacity, the company is levered 7.4x.

The company generated roughly USD 13m of free cash flow on an LTM basis, based on USD 106m of EBITDA, USD 44m of capex and USD 49m of interest expense, one of the sources said.

Anchor Glass did not respond to a request for comment. CVC declined to comment.

2018 Debtwire

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