Warner Chilcott may use P&G drugs acquisition to reduce debt
This article was originally published in Scrip
Warner Chilcott may be able to reduce some of its debt after its acquisition of Procter & Gamble's prescription drugs business, due to an existing deal between P&G and Sanofi-Aventis.
The sale of P&G's branded drugs unit gives Sanofi-Aventis the right to exercise an option to sell its interest in a global marketing agreement for the osteoporosis treatment Actonel (risedronate sodium). Warner Chilcott may have to buy the interest at a fair market value, which will be determined by independent third-party firms.
In order to prepare for this eventuality, some of Warner Chilcott's subsidiaries have entered into senior secured credit facilities, which included a delayed-draw term loan facility worth $350 million, which could be borrowed to buy Sanofi-Aventis's interest.
If Sanofi-Aventis does not choose to exercise its right, Warner Chilcott will seek to amend the senior secured facilities to allow it to use the borrowed $350 million to repurchase or redeem its outstanding 8.75% senior subordinated notes that are due in 2015.
Subordinated debt is debt that ranks after other debts should a company fall into receivership or be closed.
Warner Chilcott had $380 million in long-term debt at the end of September, down from $956.6 million at the end of last year.