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Concordia International Corp. Completes Recapitalization Transaction

Concordia International Corp. Completes Recapitalization Transaction2018.09.07

MISSISSAUGA, ONSept. 6, 2018 - Concordia International Corp. ("Concordia" or the "Company") (TSX: CXR), an international specialty pharmaceutical company focused on becoming a leader in European specialty, off-patent medicines, today announced the completion of the recapitalization transaction (the "Recapitalization Transaction") described in the Company's management information circular dated May 15, 2018 (the "Circular"), and implemented pursuant to the court-approved plan of arrangement dated June 26, 2018, under the Canada Business Corporations Act(the "CBCA Plan").

 

"We believe that the successful closing of the Recapitalization Transaction will allow us to pursue our strategy and achieve our goals," said Graeme Duncan, Chief Executive Officer of Concordia. "We have an enviable global specialty generics platform, and will be seeking both organic and inorganic growth opportunities to leverage this platform to its full potential. With a new executive leadership team, a revitalised and strong financial structure and our exceptional global platform, we are looking forward to an exciting future. We thank all stakeholders and employees for their commitment to Concordia as we conclude this significant milestone in the Company's history."

The Recapitalization Transaction includes, among others, the following key elements:

  • the Company's total debt has been reduced by approximately US$2.4 billion and its annual cash interest expense has been reduced by approximately US$170 million;
  • US$586.5 million in cash was invested pursuant to a private placement (the "Private Placement") by certain parties and their subsidiaries that executed the subscription agreement with Concordia, dated May 1, 2018, in exchange for new limited voting shares of Concordia representing in the aggregate approximately 87.69% of the outstanding limited voting shares of Concordia upon implementation of the Recapitalization Transaction;
  • the Company's secured debt (the "Secured Debt") in the aggregate principal amount of approximately US$2.1 billion, plus accrued and unpaid interest, has been exchanged for (i) cash in an amount equal to any outstanding accrued and unpaid interest (at contractual non-default rates) in respect of the Secured Debt, (ii) cash in the amount of approximately US$605 million (taking into account early consent cash consideration for holders of Secured Debt entitled to early consent cash consideration under the CBCA Plan), and (iii) approximately US$1.36 billion of new secured debt (the "New Secured Debt") comprised of new senior secured term loans (approximately US$1.06 billion, denominated in U.S. dollars and Euros) and new senior secured notes (approximately US$300 million, denominated in U.S. dollars);
  • the Company's unsecured debt (the "Unsecured Debt") in the aggregate principal amount of approximately US$1.6 billion, plus accrued and unpaid interest, has been exchanged for new limited voting shares of Concordia representing in the aggregate approximately 11.96% of the outstanding limited voting shares of Concordia upon implementation of the Recapitalization Transaction (taking into account early consent shares for holders of Unsecured Debt entitled to early consent consideration under the CBCA Plan), with holders of the Company's existing 7.00% unsecured notes on an aggregate basis receiving approximately 2.3987 limited voting shares per US$1,000 of principal amount of 7.00% unsecured notes, holders of the Company's existing 9.50% unsecured notes on an aggregate basis receiving approximately 2.4403 limited voting shares per US$1,000 of principal amount of 9.50% unsecured notes, and lenders under the unsecured equity bridge loan on an aggregate basis receiving approximately 2.4625 limited voting shares per US$1,000 of principal amount of the unsecured equity bridge loan in exchange for their Unsecured Debt pursuant to the terms of the CBCA Plan, and early consenting holders of the Company's Unsecured Debt receiving an additional approximately 1.1977 limited voting shares per US$1,000 of principal amount of Unsecured Debt in exchange for their Unsecured Debt pursuant to the terms of the CBCA Plan;
  • the Company's existing common shareholders retained their common shares, subject to a 1-for-300 common share consolidation (the "Share Consolidation") and re-designation as limited voting shares pursuant to the CBCA Plan, representing approximately 0.35% of the outstanding limited voting shares of Concordia upon implementation of the Recapitalization Transaction;
  • all other equity interests in Concordia, including all options, warrants, rights or similar instruments, have been cancelled pursuant to the CBCA Plan, and all equity claims, other than existing equity class action claims against Concordia (the "Existing Equity Class Action Claims"), have been released pursuant to the CBCA Plan, provided that any recovery in respect of any Existing Equity Class Action Claims has been limited pursuant to the CBCA Plan to recovery from any applicable insurance policies maintained by the Company;
  • any and all (a) defaults resulting from the commencement of the CBCA proceedings, and (b) third party change-of-control provisions that may have been triggered by implementation of the Recapitalization Transaction, have been permanently waived pursuant to the CBCA Plan;
  • obligations to customers, suppliers and employees (other than the cancellation of certain equity interests, described above) were not affected by the Recapitalization Transaction; and
  • pursuant to the CBCA Plan, certain amendments were made to the Company's articles to, among other things, amend Concordia's authorized capital and provisions attaching to its shares, and the Company's existing by-laws were repealed and a new general by-law of Concordia was adopted and approved.

The Share Consolidation being completed as part of the Recapitalization Transaction reduced the number of issued and outstanding Concordia common shares to approximately 170,946 (prior to taking into account the issuance of the limited voting shares pursuant to the Recapitalization Transaction).  Together with the new limited voting shares issued pursuant to the Recapitalization Transaction, the Company now has a total of 48,854,257 limited voting shares issued and outstanding, which will commence trading on the Toronto Stock Exchange (the "TSX") on September 11, 2018 under the symbols CXR (in Canadian dollars) and CXR.U (in US dollars).

Upon completion of the Recapitalization Transaction, the Company expects to have approximately US$200 million of unrestricted cash on hand, after taking into account certain advisory and other customary fees to be paid after the close of the Recapitalization Transaction.

In connection with the implementation of the CBCA Plan, Concordia finalized and entered into an investor rights agreement (the "Investor Rights Agreement") with the parties that participated in the Private Placement, as further described in the Circular.  The Company has also amended the previously announced and posted amendments to the articles of Concordia (the "Articles Amendments") which reflect certain aspects of the Investor Rights Agreement and became effective upon implementation of the CBCA Plan.  The final versions of the Investor Rights Agreement and the Articles Amendments will be posted on the Company's website at www.concordiarx.com and/or under the Company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

As part of the Recapitalization Transaction, a new management incentive plan is being adopted pursuant to the CBCA Plan, pursuant to which a maximum of up to 7.5% of the limited voting shares outstanding upon implementation of the CBCA Plan could be issued, as approved in connection with approval of the CBCA Plan.  When such limited voting shares are issued, they will dilute the limited voting shares of Concordia issued upon implementation of the CBCA Plan.

In connection with the implementation of the CBCA Plan and the new management incentive plan, certain amendments were made to the CBCA Plan pursuant to its terms.  The final amended CBCA Plan will be posted on the Company's website at www.concordiarx.com and/or under the Company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

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