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Concordia Sets Final Financing Plan; Notes Might Not Be Syndicated

Concordia Healthcare announced today a finalized structure for its financing of the acquisition of Amdipharm Mercury. According to a filing, the debt financing consists of term loans of roughly $1.865 billion, including U.S. dollar and sterling tranches, and senior unsecured notes/loans of up to $790 million, with maturities of six and seven years respectively. The balance of the financing will consist of an unsecured bridge loan of up to $180 million, which under the terms of the amended commitment letter, will have a maturity date of two years.

However, several sources indicate that the $790 million of unsecured notes/loans may not be syndicated in the high-yield market at this time, and may be placed with the bridge loan holders or potentially funded as leads work through options. Sources pointed to a 9% or 9.5% cap on the bridge loan, and currently the existing 7% notes due 2023 are trading with a 10% yield, at 94, trade data show. Note the bond offering had not been announced in the market, although S&P and Moody’s assigned CCC+ and Caa2 ratings to an originally proposed $950 million eight-year bond offering.

As reported yesterday, arrangers Goldman Sachs, Credit Suisse, Jefferies, and RBC Capital Markets trimmed by one year the proposed maturities of Concordia Healthcare’s cross-border institutional term loans.

Arrangers didn’t provide any update yesterday to price talk on the term debt. The $1.1 billion U.S. dollar B term loan, now six years, is officially talked at L+400–425, with a 1% LIBOR floor and offered at 99. The £500 million (roughly $759 million) sterling-denominated, six-year tranche is talked at L+450–475, also with a 1% floor and a 99 OID. Lenders to both the dollar and the sterling tranches are offered six months of 101 soft call protection. Unofficially, the loans appear to be in price discovery.

Arrangers held a follow-up call with investors yesterday to discuss both companies’ results and forecasts. Sources noted that the deal has been negatively impacted by both broad market conditions, as well as concerns around pharmaceutical credits, which have traded off in recent sessions amid scrutiny over rising drug prices.

Following the closing of the acquisition, Concordia’s total debt, including both new debt and existing senior notes of $735 million, with have a maximum blended interest rate of roughly 7.25% as announced on Oct. 9, 2015, according to filings. —Staff reports