Concordia Plan Cuts Debt, Replaces CEO, Wipes Out Most Stock

(Bloomberg) -- Concordia International Corp. reached an agreement with its creditors to cut its debt load by $2.4 billion in a deal that ousts the chief executive and will leave shareholders all but wiped out.

The pharmaceutical company’s turnaround accord includes raising $586.5 million through a private equity rights offering and new secured debt of about $1.4 billion, and cutting annual interest expense by $171 million, according to a statement Wednesday. Holders of about 72 percent of the secured debt and 64 percent of the unsecured debt have signed off on the plan, which also received Ontario court approval.

Secured debt holders would receive cash and new secured debt equal to 93.4 percent of their principal amount, including a 5 percent early consent cash consideration. Proposed terms include $300 million of new six-year senior secured notes with an 8 percent interest rate, and a six-year senior secured term loan, according to the term sheet.

The funds raised through the equity rights offering will be put toward acquiring 88 percent of the outstanding shares to compensate secured debt holders. The stock closed down 32 percent at 40 Canadian cents in Toronto on Wednesday.

CEO Change

Unsecured debt holders will receive about 12 percent of the common shares in the restructured company and existing shareholders will hold on to 0.35 percent of the common shares. Stakeholders will vote on the plan on June 19.

The company also said Graeme Duncan, who has served as president of the international segment since January 2016, was appointed interim CEO immediately. Current CEO Allan Oberman is leaving to pursue other opportunities, the statement said.

Concordia has been in negotiations with its creditors since October to restructure its balance sheet under the Canada Business Corporations Act. The Oakville, Ontario-based company has been under court protection from its creditors, which prevented them from pursuing other remedies to get their money back, while it negotiated a plan to reduce its $3.7 billion debt load.

Bondholder groups, which included one holding secured debt and a second group holding both junior debt and secured notes, had been haggling over the size of the equity rights offering and who got to participate in it.

Concordia hasn’t posted an annual profit since 2014. The company’s debt ballooned during a growth-by-acquisition binge. Its North American drug portfolio includes Donnatal, for irritable bowel syndrome; epileptic seizure drug Zonegran; and Nilandron, which treats prostate cancer.

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