Amber Kanwar

Anchor, Reporter

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Shares of Concordia International staged a mid-day rally after announcing it is tapping the debt markets once again. Concordia announced it intends to raise US$350 million in senior secured notes in an effort to fortify the company’s liquidity position as it stares down the barrel of nearly US$250 million in payments between now and March of next year.

Concordia (CXR.TO), which has more than US$3B in debt, contends that this latest round of debt would increase its leverage modestly to 5.7-times – up from 5.6, according to its investor presentation.

Most of the US$250 million payment obligation is to fund a so-called “earn out” to Cinven and other investors – payments owed as part of compensation that was promised when Cinven sold Amdipharm Mercury to Concordia last year. 

The deal, which is said to be solely marketed by Goldman Sachs, is a bet that investors will be willing to be a stop-gap measure while Concordia pays out its obligations due by the end of Q1 2017. The company’s payment obligations drop off significantly from there.   Following the debt announcement, Moody’s changed its rating outlook to negative from stable.

"While the notes offering improves liquidity over the next 12 months, it further increases Concordia's leverage at a time when the company is facing a number of business challenges" said Jessica Gladstone, Senior Vice President with Moody's.

The drug maker also warned today that its adjusted earnings for the third quarter would be lower than the second quarter due to the weaker British pound and competitive pressures that have hurt sales on some of its key drugs.

Concordia shares have lost 89 per cent in value as it has struggled under the weight of its debt, weak sales of key drugs, a weaker British pound, and drug price scrutiny in the U.K.

In September, the United Kingdom proposed new rules that would prevent drug makers from dramatically increasing their prices. Concordia sold off on the news because 44 per cent of its sales come from the U.K. market.  Today, Concordia addressed pricing scrutiny in its investor presentation, suggesting that only 9 per cent of total revenue could potentially be affected.