Endo to Rework $3.3 Billion Loan as Opioid Litigation Looms

Endo International Plc is trying to get more breathing room on its debt as it contests with ongoing opioid and patent litigation and an expected drop in earnings.

The drug company said it will issue new debt to refinance its $3.3 billion loan coming due in 2024, leaving the same guarantees and collateral in place while pushing out the due date, according to a statement Thursday. The financing, if completed, is not expected to increase Endo’s total debt load.

The company is in talks for a $2.295 billion first-lien term loan, according to people familiar with the matter. Preliminary terms are for 425 points over the London interbank offered rate, a 0.75% Libor floor and an original issue discount ranging from 99 cents to 99.5 cents on the dollar. A senior secured first-lien debt in the amount of $1 billion is also planned, according to the people. Lender call has been set for 4:00 p.m. Thursday.

Endo is one of several pharmaceutical companies accused of downplaying opioids’ risks and over-selling their benefits, and finds itself tangled in expensive, ongoing litigation. With competitors like Purdue Pharma LP and Mallinckrodt Plc, manufacturers may pay a total of $20 billion in a settlement with states and other municipalities, according to Bloomberg Intelligence analyst Holly Froum.

Endo, which has been trying to pull out of talks with other drug-makers and distributors seeking an industry-wide settlement, may pay less than $3 billion, Froum said. The company reached a prior agreement with New York related to the marketing of its Opana painkiller, which limits the state’s claims in an upcoming court trial, Froum said.

Dublin-based Endo has been cutting costs and reworking its balance sheet amid the lawsuits and a generic drug business that has pressured earnings. It faces further uncertainty around patent litigation tied to its low-blood-pressure drug Vasostrict, which has a trial set for July.

The refinancing makes Endo’s debt maturities over the next four years more manageable with existing and future cash flow, Moody’s Investors Service said in a report Thursday. The transaction will also extend a portion of its revolver expiration to March 2026, the rater said.

Endo ended 2020 with $1.2 billion of unrestricted cash and is anticipating a decline in revenue and earnings this year driven by its generics unit. It’s now focused on growing Ebitda, or earnings before interest, tax, depreciation and amortization, Chief Financial Officer Mark Bradley said at a conference hosted by JPMorgan Chase & Co. this week.

“We hope that by doing that, we also delever,” Bradley said. “Then we would look at buying back debt to the extent it makes sense.”

Endo launched a $2.85 billion debt exchange in May to give itself more time to focus on a turnaround, pushing out its balance sheet by around five years. Its first-lien bonds due 2027 trade near 108 cents on the dollar, while the unsecured notes due 2028 are hovering around 86 cents, according to Trace.

JPMorgan Chase & Co. is managing the sale for which commitments are due March 11, the people said.

–With assistance from Lara Wieczezynski.