Alkermes increases pricing on first-and second-lien term loans

By Sara Rosenberg

New York, June 27 - Alkermes Inc. lifted the spread on its $310 million six-year first-lien term loan B (BB) to Libor plus 525 basis points from Libor plus 425 bps to 450 bps and on its $140 million seven-year second-lien term loan C (B) to Libor plus 800 bps from talk of Libor plus 725 bps to 750 bps, according to a market source.

As before, both covenant-light term loans includes a 1.5% Libor floor.

Also unchanged is the first-lien term loan's original issue discount of 99 and 101 soft call protection for one year, and the second-lien term loan's discount of 98 and call protection of 103 in year one, 102 in year two and 101 in year three.

Commitments are due at 5 p.m. ET on Tuesday and allocations are expected later this week.

The term loans include a ticking fee of 75 bps from allocation through July 31, then half the funded spread from Aug.1 through Sept. 30 and the full spread thereafter.

Morgan Stanley & Co. Inc. and HSBC Securities (USA) Inc. are the lead banks on the senior secured deal.

Proceeds will be used to help fund the company's merger with Elan Drug Technologies to create Alkermes plc.

Under the agreement, Elan Corp. plc will receive $500 million in cash and 31.9 million ordinary shares of Alkermes plc common stock. Also, existing shareholders of Alkermes Inc. will receive one ordinary share of Alkermes plc in exchange for each share of Alkermes Inc. they own at the time of the merger.

The cash and stock transaction is valued at about $960 million.

On a trailing 12-month basis as of March 31, the combined company would have had pro forma revenues of roughly $450 million and adjusted EBITDA of $80 million.

Pro forma debt to EBITDA will be 4.6 times and net debt to adjusted EBITDA will be 2.5 times. The company expects these ratios to improve quickly as EBITDA grows and debt is paid down. Also, cash flows are expected to be sufficient to repay the debt in four to five years.

The transaction is expected to close in September, subject to approval by Alkermes' stockholders and the satisfaction of customary conditions and regulatory approvals, including antitrust approvals in the United States.

Alkermes plc will have headquarters in Dublin, Ireland. Alkermes Inc. is a Waltham, Mass.-based biotechnology company. Elan Drug Technologies is an Ireland-based drug delivery business.

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