Anchor Glass extends revolver but could face liquidity crunch in 2020

[Editor’s Note: This story has been updated since initial publication, to correct the liquidity figure given in the second paragraph.]

Anchor Glass Container faces a liquidity crunch going into 2020 as it attempts to recover from production disruptions, increased capex needs and declining demand for bottles, according to two sources following the situation.

To alleviate concerns over revolver availability, the CVC Capital Partners-owned glass packaging producer extended its ABL due 2021 by two years to 2023, while reducing the size to USD 105m. Following the downsize, the company said it had USD 64m of revolver availability as of 30 September, alongside minimal cash.

Anchor likely burned at least USD 30m of free cash flow in 2019, based on source expectations for USD 105m of full-year EBITDA, less USD 90m of expected capex and USD 50m of interest expense. The company hasn’t reported 4Q and full-year 2019 yet.

If Anchor is unable to grow its earnings in 2020, it runs the risk draining its remaining liquidity, the sources said.

“The numbers are still murky, because it’s unclear how much of the capex in 2019 will go or has gone toward rebuilding the plant that caught on fire in 2018,” as opposed to other projects, one of the sources said. Anchor’s historical capex level before a 2018 plant fire was around USD 50m per year.

Earnings-wise, in 3Q19, Anchor reported USD 25m of EBITDA, down from USD 29.1m the previous year. Revenue for the quarter declined slightly to USD 141m in 3Q19 from USD 142.4m in 3Q18.

The company is 7.7x levered, based on USD 813.4m of total debt and USD 105m of LTM EBITDA.

The May 2018 fire impacted Anchor’s earnings for several subsequent quarters, while it also suffered a loss of volume from Dr Pepper Snapple Group. Snapple’s win-back contract with Dr Pepper Snapple is set to expire in 2020.

Meanwhile, Anchor’s bottled beer end market has experienced a decline in consumer demand, the sources noted. According to Beverage Dynamics, total US beer volume declined in 2019 for the sixth consecutive year. And the Beer Institute said last year that aluminum cans have gained share in domestic beer volumes for the sixth consecutive year. Cans made up 62% of beer volume produced and sold in the US as of early 2019, the Institute said.

Amid the operational difficulties, Anchor brought on Alvarez & Marsal for turnaround help, Debtwire reported last January.

Anchor’s USD 647m L+275bps first lien TLB due 2023 fell as low as the 65.75/69.75 context post-3Q earnings in November. The loan has since recovered and was last quoted today at 72.556/74.389, according to Markit.

The USD 150m L+775bps second lien term loan due 2024 fell as low as the 45.5/50.167 context after earnings. The loan was last quoted today in 50.429/55.429 context.

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

2020 Debtwire

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