RLPC-Ineos asked to pay up for loan covenant waiver

LONDON, Dec 2 - Investors are asking Ineos Group to pay up in return for passing the company's request for a two-quarter holiday from its loan covenants, to avoid a breach, bankers and investors said on Tuesday.

"The general consensus is that more fee and less covenant relaxation is required," a leading institutional investor said.

Ineos Group, the world's third-largest chemicals group, asked its bankers to grant a temporary waiver in mid-November before a full covenant reset next April.

By that stage, the company expects to have better visibility with regard to its business, which has been hit by customer destocking.

Ineos offered its investors a fee of 50 basis points and a 100-125 increase on the interest margin on its 7.62 billion euro loan to pass the waiver, but investors are taking a tougher line and want at least another 50 basis points to agree the changes.

"Ineos' waiver will get through but not in its current form. One way or another, the company will have to pony up another 50 bps either in upfront fee or margin, which will get people there," a leading institutional investor said.

Ineos management has spent the last ten days meeting investors since launching the waiver request, which requires majority consent in order to be passed by the company's 200-plus bank syndicate on Dec. 9.

"Investors have raised some points on the terms of the consent request and Ineos' management are presently considering those terms," a banker close to the waiver said.

The pushback from investors is being attributed to the high proportion of U.S. investors in Ineos' syndicate, who are accustomed to higher margins and fees on leveraged loans, rather than specific credit issues with the company or problems with its plans.

Bankers close to the deal, however, said that investors had also asked for a backstop facility that would allow lenders to take action, if required, within the two-quarter covenant holiday period.

Ineos' lead banks, Barclays and Merrill Lynch, said that the waiver request had been well received and investors are willing to give the company the time it needs to come up with its new business plan next year.

"The feedback to date is constructive and the syndicate fully understands that time is needed to come up with a longer term plan to reset the covenant levels. Investors are working to understand all the credit issues," a spokesperson for the banks' said.

Ineos' full covenant reset in April is expected to include a general tightening of existing loan covenants to prevent any further cash leakage from the business and the insertion of some new covenants, sources said.

Changes to existing covenants are expected to focus on restricting management fees to Ineos Capital and funds for capital expenditure.

New covenants linked to working capital will be added which include definitions of minimum cash to be held on balance sheet following adjustments for inventory changes, they added.