Endo plans $2.9 billion facility, $700 million bonds for AMS purchase

By Sara Rosenberg

New York, April 14 - Endo Pharmaceuticals revealed in an 8-K filed with the Securities and Exchange Commission on Thursday that its financing for the acquisition of American Medical Systems will include a new $2.9 billion senior secured credit facility and the sale of $700 million of senior notes.

The credit facility consists of a $500 million five-year revolver, a $1.5 billion five-year term loan A and a $900 million seven-year term loan B.

Initial pricing on the revolver and the term loan A is expected to be Libor plus 250 basis points, with the revolver having a 50 bps unused fee. Pricing on the tranches can range from Libor plus 175 bps to 250 bps and the revolver commitment fee can range from 37.5 bps to 50 bps, based on leverage.

Initial pricing on the term loan B is expected to be Libor plus 325 bps with a step-down to Libor plus 300 bps at 3.75 times leverage. There is a 1% Libor floor and 101 soft call protection for six months.

Amortization on the term loan A is 3.75% in year one, 7.5% in year two, 10% in years three and four, and 15% in year five, and amortization on the term loan B is 1% per year.

The credit agreement includes a $500 million accordion feature.

Financial covenants include a maximum leverage ratio and minimum interest coverage ratio.

Meanwhile, the notes are backed by a commitment for a $700 million one-year bridge loan that is priced at Libor plus 625 bps, increasing by 50 bps at the end of each three-month period. There is a 1% Libor floor.

Morgan Stanley & Co. Inc. and Bank of America Merrill Lynch are leading the debt financing, with Morgan Stanley the administrative agent on the credit facility and Bank of America the agent on the bridge loan.

Endo is buying American Medical for $30 per share, or $2.9 billion in cash, which includes the assumption and repayment of $312 million of debt.

On a 2011 pro forma basis, the combined company would have had revenues of about $3 billion and EBITDA of about $1 billion.

The transaction is also expected to be accretive to adjusted diluted earnings per share by $0.60 in 2012 and by $0.80 in 2013.

Closing is expected late in the third quarter, subject to customary conditions, regulatory approval and American Medical stockholder approval.

Endo is a Chadds Ford, Pa.-based specialty health care company focused on branded products and specialty generics. American Medical is a Minnetonka, Minn.-based provider of devices and therapies for male and female pelvic health.

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