Concordia said to seek deal to slash debt load
Drugmaker pursuing restructuring plan with creditors after losses top $1 billion
TORONTO Concordia International Corp., the drugmaker that won court protection from creditors last week as it negotiates a debt restructuring, is seeking to strike a deal to cut its debt load within the next few weeks.
The company had the consent of creditor advisers to pursue the court protection and will seek to reach an agreement within four weeks, according to a person with knowledge of the matter, who asked not to be identified because the talks are private. Options being explored include a debt exchange in which creditors would swap their obligations for equity or new debt.
The company said last week it also hasn’t ruled out a filing under Chapter 11 in the U.S. or the Companies’ Creditors Arrangement Act, the closest Canadian equivalent to the American bankruptcy law.
The pharmaceutical company, weighed down by US$3.7 billion in debt, announced Friday it’s pursuing a restructuring plan with its creditors under the Canada Business Corporations Act after it opted not to pay an interest payment and the maturity on a bridge loan due this month to preserve cash. Concordia was granted creditor protection until further notice by an Ontario court, which prevents its creditors from pushing it into default or pursuing other remedies to get their money back.
A representative for Oakville, Ont.-based Concordia declined to comment.
Concordia will require a majority of the holders representing two-thirds of the value of each stakeholder class to approve its restructuring plan under CBCA, according to Stephanie Ben-Ishai, a professor at York University’s Osgoode Hall Law School. The company will also require final sign-off from an Ontario judge.
Restructuring under CBCA allows Concordia to restructure without filing under Chapter 11 or the Companies’ Creditors Arrangement Act. It’s an interpretation of a Canadian corporate law that has expanded over the past decade to include restructuring, Ben-Ishai said.
“It’s another option in the toolbox for reorganizing a company that might be near insolvent but solvent,” she said by phone from Toronto. “It is often used to target restructuring the balance sheet in less time, less court intervention, less professional costs, and also avoiding the stigma of bankruptcy.”
Concordia’s debtholders could file a motion to have the creditor protection lifted in order to pursue other remedies or course of action if they find that the negotiations are taking too long, according to Brian Pawluck, an independent restructuring and insolvency specialist.
Concordia hired advisers Perella Weinberg Partners and Skadden, Arps, Slate, Meagher & Flom LLP earlier this year to explore strategic alternatives, including a restructuring, after months of deteriorating liquidity and mounting interest payments. The company hired Goodmans LLP as its Canadian counsel.
A representative for Perella declined to comment. A representative for Skadden didn’t comment. A call to Goodmans with a request for comment wasn’t immediately returned.
The company hasn’t posted an annual profit since 2014, with losses so far this year topping US$1 billion. Discussions with lenders, who also hired advisers, began this summer and are ongoing, according to a company filing.
Concordia has about US$340 million of cash on hand and intends to pay any obligations on its secured debt and its trade and employee obligations, according to a filing. It has payments on its secured term loans due in December.
Bennett Jones LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Ashurst LLP are representing the unsecured debtholder committee, according to a filing. Osler, Hoskin & Harcourt LLP and White & Case LLP are representing secured debtholders.
A representative for Ashurst declined to comment and representatives for the other firms didn’t comment.
It’s another option in the toolbox for reorganizing a company that might be near insolvent but solvent.