British chemical company Ineos' proposal to amend its €6.8 billion debt to allow a €1 billion loan and bond refinancing is running into opposition from investors, bankers said on Tuesday. Ineos, which has been meeting investors in London and New York, asked lenders to amend its loan earlier this week to let it issue €1 billion  of five-year senior secured high-yield bonds with a loan alternative for private investors. Lenders are also being asked to waive a commitment from Ineos that it made in last year's loan amendment to repay €700 million of debt by the end of 2011 as well as extend the maturity of a revolving credit by one year to December 2013 and reset loan covenants to provide 20% headroom.

"The refinancing will be in a different way from that envisaged," a banker close to the deal said. Ineos's proposal not to repay debt and deleverage the company as originally pledged is proving controversial with credit investors and fund managers including Collateralized Loan Obligation (CLO) funds.

"The company made some commitments to deleverage the senior bank debt and we are not satisfied. We need to have the discussion why they (Ineos) are not deleveraging," a leading fund manager said. Ineos declined to comment.

High Approval Rate

The changes need approval from 90% of Ineos' lenders and 50.1% of bondholders to be passed. Bondholders have been offered a fee of 25 basis points (bps) and have been asked to respond by April 1 and lenders are being offered a fee of 50 bps with a deadline of April 9.

"Ineos isn't going to get 90% approval if it doesn't come up with something different," a second fund manager said. A group of around 25-35% of loan investors are giving feedback on the amendment to Barclays and JP Morgan, the two fund managers said.

"There is some noise around the €700 million - that repayment was basically driven by disposals that are still expected to happen at some point," the banker close to the deal said. Investors are also calling for pricing to be increased on the senior loan to compensate for the issue of senior secured bonds with similar rights and security with a higher coupon.

The €1 billion  of senior secured bonds will be denominated in a mix of euros and dollars and are expected to be issued by mid-April. Funds will be used to repay €500 million from the term loan A and €500 million from the term loan B and any extra money will be used for pro-rata repayments across tranches A, B and C, a banker close to the deal said.

Speculation about repayment at face value or par has pushed the secondary price of Ineos's debt higher in the last two weeks in the secondary loan trading market, according to Thomson Reuters LPC data. The term loan A was quoted at 99.15% of face value on Tuesday, up 3.4 points since March 10 and the term loan B was quoted at 97.65%, up 2.67 points in the same time, TRLPC data shows. Ineos said that it was ahead of its business plan in the early months of 2010 and reported a rise in earnings before interest, taxes, depreciation and amortisation (Ebitda) on an historic cost basis to £1.222 billion in 2009 from £594 million in 2008. On Thursday, Standard & Poor's affirmed Ineos's CCC+ rating and revised the outlook to developing from negative, noting that the group's 2009 performance was at a cyclical low but in line with expectations after severe cost cutting. Moody's upgraded Ineos's corporate family one notch to Caa1.