Aspen locks up $385m funding
Loan is secured just before financial markets crumbled, drives golobal expansion plans
October 17, 2008
By Samantha Enslin-Payne Durban
Aspen Pharmacare secured a $385 million (R4 billion) loan just before financial markets crumbled, a development that has given impetus to its plans to expand globally.
The funding arrangement announced yesterday was to replace upfront finance from Standard Bank that enabled Aspen Global, the group's international division, to buy the intellectual property rights of four GlaxoSmithKline (GSK) products for £170 million (R3 billion).
Since the GSK deal was announced in July, Aspen has been negotiating the final funding arrangements.
Gus Attridge, the deputy chief executive at Aspen, said yesterday: "While it wasn't easy [to secure the loan], it was easier than if we had tried to raise funds today. The timing was fortunate."
The $385 million loan was secured through the offshore arms of Standard Bank, Absa and Nedbank.
Quinton Ivan, a portfolio manager at Coronation Fund Managers, said there had been some concern that in light of the credit crunch Aspen would struggle to secure funding to pursue its global strategy.
"This is positive for Aspen. Given the credit crisis, a lot of banks have withdrawn funding lines from business, which is impeding their growth. But Aspen will now be able to pursue its growth strategy," Ivan said.
Attridge said Aspen had approached a number of banks but international banks were not as competitive. "The bankers we chose were in effect the most keen to do the deal."
Some big international banks that Aspen had approached were only prepared to engage if they were given sole rights to arrange the loan, which would have attracted larger fees.
"Structuring the deal was something people didn't think we would be able to do," Attridge said.
But Aspen said it was satisfied with the terms of the loan.
The funding deal includes a five-year amortising loan of $255 million with a one-year capital repayment holiday.
This means that for the first year Aspen pays only interest but thereafter pays interest and incrementally reduces the capital amount, which will result in lower-interest payments.
The balance of $130 million is a five-year non-amortising loan.
Attridge said the repayments of the capital amount were flexible and would depend on how much cash the firm generated in its international business. The cost of the debt has been fixed at 6.11 percent a year for 90 percent of its term.
Ivan said the group was very cash flush and therefore it would be able to comfortably service the loan.
GSK gives Aspen the global rights, excluding the US and Japan, to Eltroxin, which is used to treat hypothyroidism, a deficient activity of the thyroid gland; Imuran, which is an immunosuppressant that is sometimes dispensed after organ transplants; Lanoxin, which is for specific heart conditions; and Zyloric, which is used to treat gout.
Stephen Saad, Aspen's group chief executive, said in July: "These four products alone generate more than R1 billion around the world and we would add 80c to our earnings for every share."
Attridge said $45 million of the loan would be available to pursue attractive opportunities.
"We are constantly on the search for good value. There are a couple of prospects."
|
|
