Phoenix Says Independence Secured by Debt Deal
Phoenix, Europe's second-largest drugs distributor, said on Monday it had secured its independence and a platform for growth by winning lenders' backing for a financial overhaul.
Phoenix, which competes with Celesio in the wholesale market, will take out a €2.7 billion syndicated loan with 17 banks and plans to sell a €500 millionbond, it said on Monday. Phoenix owner Ludwig Merckle, whose father Adolf Merckle committed suicide last year after ceding control over much of his business empire to lenders, had also agreed to bankroll a €500 million capital increase, the company added.
Merckle raised €3.6 billion - roughly €600 million more than was initially expected - in the forced sale of generic drug business Ratiopharm to Israel's Teva this year, giving him the financial clout to keep control of what has remained of his father's conglomerate.
"The financial repositioning lays the groundwork for our independence as a company and for Phoenix's further growth," Chief Executive Reimund Pohl said in a statement.
Sources told Reuters last month that talks with banks over refinancing about €3 billion of debt at Phoenix would soon be finalized. Having averted a sale of Phoenix, Ludwig Merckle could take the group public next year, the sources said. Creditor banks had urged Merckle to consider informal approaches for Phoenix before the sale of Ratiopharm, the Merckle empire's prize asset, sources had told Reuters earlier this year. Some of the proceeds of the Ratiopharm sale had been used to pay back €410 million owed to Phoenix, the drugs wholesaler said on Monday.
Credit rating agency Standard & Poor's gave Phoenix a CCC long-term rating, eight notches into non-investment grade territory, adding the drugs distributor was on track to improve by four steps to B+ if the bond issue succeeds and if it resolves a standstill agreement with banks. Moody's, in turn, assigned a B1 rating, equivalent to S&P's B+ and four notches below investment grade, with a stable outlook. A recovery in financial markets last year helped Ludwig Merckle raise more than €2 billion for a majority stake in HeidelbergCement. He also raised more than €400 million from selling Ratiopharm's Swiss sister company Mepha to U.S. drugmaker Cephalon.
