Ineos reverses out of sport as debts pile up

Credit ratings for Sir Jim Ratcliffe’s Ineos Group have been slashed to “negative” at the same time as many of his sporting interests, including Manchester United, are playing in the red.

So what? The carthorse of Ratcliffe’s sprawling business empire is saddled with debt. That has led to cuts across the billionaire’s passion projects over the last few months. Casualties include:

• Ineos’s £22 million sponsorship of the New Zealand All Blacks rugby team, terminated two years early and now the subject of a lawsuit;
• Ratcliffe’s relationship with Sir Ben Ainslie and support for his America’s Cup campaign (Ineos is now sponsoring its own sailing team);
• The Ineos Grenadiers cycling team, which is seeking new investors after Ineos indicated it doesn’t “want to spend any more money”;
• a sponsorship deal with Tottenham Hotspur; and
• Manchester United, which plans to make another 200 workers redundant after job cuts last year.

Ratcliffe’s strategy is borne of his training as an engineer turned private equity executive. Attack costs, load up on debt and snap up assets on the cheap. The question is whether that approach applies as well to the often emotional world of sport as it does to petrochemicals.

A private man. Ratcliffe, whose success building Ineos at one point catapulted him to the top of the Sunday Times rich list (he’s now fourth), is a self-confessed “cynic” about public markets.

If listed, Ineos would command a place near the top of the FTSE 100, but staying private has its perks: quarter-to-quarter volatility isn’t a concern, while ownership is less fractional (Ratcliffe holds 60 per cent of Ineos, fellow directors Andy Currie and John Reece hold the remaining shares between them). Bankers who worked with Ineos say its use of bond financing rather than stock markets has been crucial to its success.

But … Ineos’s expansive and opaque structure – and its dependence on debt – have made it a fairweather friend. Recent reports by rating providers Fitch and Moody’s have identified

• a debt pile forecast to reach £10 billion, more than five times Ineos’s annual earnings;
• “uncertainty” over a plan to repay loans of £800 million to other parts of the Ineos business empire; and
• a downgrade to the company’s ESG score “due to ownership concentration and a lack of board independence”.

The ratings agencies added that Ineos could take longer than expected to repay debts partly because of weakness in the European chemical industry caused by sky-high gas prices after Russia’s invasion of Ukraine.

Unfair playing field. Ratcliffe has his own diagnosis of Ineos’s woes. “Decarbonising Europe by deindustrialisation is idiotic,” he wrote in a letter to EU politicians this week. “We lose jobs and security and the CO2 simply floats back over Europe anyway.” The solution, he says, is to ban carbon taxes, provide competitive energy for industry and place tariffs on imports from China.

The sportsman’s bet is that by investing close to £1.5 billion in sports, Ratcliffe’s voice in matters of policy and regulation carries more weight. “There’s an awful lot of soft politics that goes on in the VIP lounges of elite sports,” says Andrew Simms, co-director of the New Weather Institute, which has published reports on fossil fuel sponsors. If this is indeed the aim, there are signs it’s paid off.

• Since 2014, Ineos has received more than £1.07 billion in government support, including £600 million for a plastics plant in Belgium.
• In 2018, Ratcliffe was knighted in the Queen’s Birthday Honours list for services to business, despite not being particularly patriotic about his own tax affairs.

Full time? “Ineos is an extractive business. Maybe he’s extracted all the value that he can get from those sports he appears to be rapidly withdrawing from,” Simms says. Ratcliffe’s willingness to engage in legal battles with some of the biggest names in sport certainly suggests that PR might not be his main business concern right now.

What’s more… Ratcliffe is an avid sports fan and Manchester United is one of his first loves. But with a total debt pile of more than £1 billion amassed during the Glazers’ ownership of the club, his newest project will be all-consuming. “If we want to make money, we’ll do that in chemicals – not football,” Ratcliffe said when he invested in Nice, a French football club. That may have to change.