Sir Jim Ratcliffe is again fighting for survival at Ineos as the industrial giant struggles with a mountain of debt of £18 billion and an increasingly hostile debt market.
Nervous bondholders have begun dumping Ineos bonds at distressed prices as the global chemical industry has slumped, opening the door to aggressive Wall Street hedge funds that specialize in exploiting companies’ distress. Around £5bn of Ineos bonds are currently trading at levels that suggest investors are pricing in serious risk of default.
For Ratcliffe, it’s an uncomfortably familiar moment. In the wake of the global financial crisis, Ineos came within hours of collapse after breaching its debt covenants and only survived after a brutal restructuring at its lenders that cost hundreds of millions in fees and higher interest payments. The tycoon later described the experience as being dependent on “predatory” creditors.
This time there is more at stake. Loans from Ineos Group Holdings and Ineos Quattro Holdings – which together make up around two-thirds of the empire – rose by almost £3bn last year alone, pushing total debt to over £18bn. The annual cost of servicing debt rose to £1.8 billion, up £600 million on the previous year.
The bond markets reacted quickly. Large tranches of Ineos bonds that traded above 90 cents on the dollar in October have since slipped to the low 70s and 80s. According to S&P Global Market Intelligence, short sellers have piled into certain Ineos bonds at an unprecedented pace, suggesting prices have further to fall.
Rating agencies have increased the pressure. Moody’s has downgraded Ineos twice since September, citing a sharp deterioration in operating performance. Sales fell by 20 percent, while profit before taxes fell by 55 percent. The agency warned of “weak debt metrics,” with debt at 13.5 times earnings amid overcapacity, weak demand and high energy and regulatory costs.
According to industry insiders, the numbers are drastic. An executive described third-quarter performance as “terrible” and warned that rising funding costs could push the company further to the brink if markets remain closed.
The collapse has drawn the attention of distressed debt specialists, including funds affiliated with Elliott Management, whose tactics have made the company a feared presence in boardrooms. Such investors often seek full repayment through litigation or attempt to engineer debt-for-equity swaps that take control away from existing owners.
Ratcliffe has blamed Ineos’ predicament on a toxic mix of high European energy costs, global trade disruptions and cheap Chinese imports flooding the market. He was particularly outspoken about Europe’s net zero policy, arguing that carbon costs are “destroying production.” In April, Ineos closed Britain’s last oil refinery at Grangemouth, costing 400 jobs, and has since announced plant closures across Germany and the US.
The cost reduction was based on a well-known Ratcliffe principle. Operations were closed, hundreds of employees were laid off, sponsorships were canceled and non-core assets were sold. Even the billionaire’s sporting ambitions were curbed as Ineos abandoned high-profile partnerships and wrote off hundreds of millions tied up in the Belstaff takeover.
But cuts alone may not be enough. A flagship plastics plant under construction in Belgium, Project One, aims to revive European production but will bring with it another £3bn of debt. Ratcliffe has acknowledged that the project may never have been approved in today’s market conditions.
Some consultants warn that completion risks “throwing good money after bad.” Others argue that abandonment would destroy long-term competitiveness.
The banks are watching closely. Barclays, which once played a crucial role in rescuing Ineos during the financial crisis, recently warned that Europe’s chemical companies must prioritize deleveraging or risk becoming “worthless” in the next downturn.
Ineos insists it has learned from the past and says it maintains tight control over costs and liquidity. Insiders say the company is better prepared than it was 15 years ago.
But as bond prices fall and activist creditors move in circles, the bottom line may no longer be solely in Ratcliffe’s hands.
