by Madalina Iacob, and Jon Berke
Concordia International tapped PJT Partners as financial advisor as it faces regulatory and financial pressures, and on the heels of organization among its bondholders, said two sources familiar with the matter.
The generic drugmaker owes a roughly GBP 72m earn-out payment due 16 December to Cinven, in connection with acquisition of Amidpharm Mercury Limited (AMCo) from the European private equity firm in October 2015. As part of the deal, Concordia is required to pay a total of GBP 144m to Cinven between the December amount and a second payment due February 2017. That’s followed by the maturity of the company’s USD 34m 9.5% unsecured equity bridge due 21 October 2017.
The company had cash of USD 162.6m and had up to USD 200m available from a secured revolving credit facility at 30 September. Its cash position increased after quarter-end to USD 492.6m after the company received USD 330m of net cash on 13 October from the closing of a USD 350m 9% first lien note due 2022.
And bondholders are gearing up to exert pressure on management. An ad-hoc group of unsecured holders organized with legal counsel Akin Gump and sent a letter to CFO Edward Borkowski expressing concerns about the company’s financial and regulatory hurdles. Concordia’s capital structure plunged further into distressed territory after the company disclosed dire 3Q16 earnings and suspended guidance.
On the regulatory front, the UK’s Competition Markets Authority could slap Concordia with a USD 90m fine related to infringement of competition law. Moreover, its earnings could take a hit if a bill pending before the UK’s House of Commons is enacted, which would allow the UK government to control pricing on generic drugs.
The issuer’s LTM EBITDA through 3Q16 came in at USD 508m, which puts leverage at 4.1x through secured debt and 7.8x total debt. Separately, the company is expected to generate USD 460m-USD 465m in EBITDA next year, due to currency outlook and competition from its North American drugs, sources previously told this news service.
Concordia’s USD 350m 9% secured notes due 2019 traded down at 92, yielding 11%, up from 88/89 context on 17 November. Concordia’s USD 735m 7% unsecured notes due 2023 is trading at 37 yielding 29%, down slightly from 38 earlier this month.
Calls to Concordia and PJT were not returned.