Endo is looking to turn over a new leaf in the US high-yield bond market this week as the drug maker prepares a US$1.25bn offering as part of a multi-billion dollar exit financing to support its emergence from bankruptcy.
The seven-year non-call three secured deal comes after a US court approved a reorganization plan for Endo International in March that will change its ownership, reduce its debt load and resolve litigation claims stemming from its alleged involvement in the opioid crisis.
The company entered Chapter 11 proceedings in August 2022 after being weighed down by over US$8bn of debt and facing civil and criminal lawsuits, partly for the way it marketed and sold its painkiller Opana ER.
Endo Inc, a new company owned by holders of the bankrupt entity's first lien debt, is using proceeds from the bond offering and a term loan B to buy all assets from Endo International. Reuters reported that the lender group includes Oaktree Capital, Silverpoint and Bain.
Endo International is using funds to settle payments under reorganization plan.
JP Morgan is leading the bond offering, which is slated to price on Thursday. Goldman Sachs is leading the US$1.25bn TLB.
S&P and Moody’s respectively assigned Endo fresh B2/B+ ratings this month, both citing an improved capital structure that will enjoy much lighter leverage and the planned settlement of over US$2bn in opioid-related liabilities.
"Endo's resolution of key litigation issues, extension of debt maturities through refinancing of its entire capital structure, and strengthening of the liquidity profile, will allow the company to execute on its strategic priorities and commercialize therapies in its pipeline," Vladimir Ronin, a Moody's analyst, said in a report last week.
According to an investor presentation, the reorganization will reduce Endo’s net leverage to three times, down from the 9.7 times logged before bankruptcy proceedings.
S&P expects adjusted net debt-to-Ebitda of 3.5 to 4.5 times over the next few years as growth picks and after Endo wipes out more than US$5bn of outstanding debt as part of the restructuring.
Initial price thoughts on the bond are in the mid 9% area. Endo International was last in the bond market in March 2021, when it issued an upsized US$1.295bn eight-year non-call three at par to yield 6.125%.
Pricing for the seven-year TLB is offered at 475bp-500bp over SOFR with a 0.5% floor. The OID is guided at 98-98.5.
Aside from the bond and TLB, the exit financing also includes a US$400m super-priority revolving credit facility.
The company said that it also intends to list its stock on a major exchange after it has completed the reorganization plan.