Warner Chilcott planning term loans, senior notes for Procter & Gamble pharmaceuticals acquisition

By Jennifer Lanning Drey

Portland, Ore., Aug. 24 - Warner Chilcott plc's final debt structure following its $3.1 billion acquisition of Procter & Gamble Co.'s global pharmaceuticals business is expected to include term loans and senior notes, Paul Herendeen, chief financial officer of Warner Chilcott, said during a Monday conference call held to discuss the transaction, which was announced the same day.

In the meantime, Warner Chilcott has secured financing commitments from six banks for a senior secured bank facility and unsecured bridge facility, he said.

The company's post-acquisition debt structure will also include $380 million of Warner Chilcott's existing senior subordinated notes, Herendeen said.

The company plans to retire its existing term loans.

Herendeen also said that in order to preserve its financial flexibility and to meet potential short-term liquidity needs, Warner Chilcott plans to have a $250 million revolving credit facility available, which is expected to be undrawn at the closing of the transaction.

"We've said in the past that we'd use debt capital as appropriate to complete transactions, and with this deal we are increasing our financial leverage," Herendeen said.

However, the transaction is expected to be accretive from a cash net income perspective upon closing, and Warner Chilcott is likely to use cash to repay debt, he said.

"The financial dynamics of our company are such that we generate a lot of cash, and the closing of this transaction will not change our financial dynamics," Herendeen said.

"In the absence of compelling opportunity to invest in our business post close, we would expect to use our free cash flow to prepay debt beginning with the first quarter post closing."

The transaction is expected to close by year-end, but timing is dependent on regulatory approvals and other conditions included in the purchase agreement, which is expected to be filed with the Securities and Exchange Commission in the coming days, Herendeen said.

Warner Chilcott's key motives behind moving forward with the transaction were that it will add the Asacol HD and Actonel brands to the company's portfolio, which will increase Warner Chilcott's diversity of revenue sources and add capabilities in Western Europe and the United Kingdom, Roger Boissonneault, chief executive officer of Warner Chilcott, said during the call.

"We are very excited to have the opportunity to acquire this fully functioning, first-class operation from P&G," he said.

Warner Chilcott is a Rockaway, N.J.-based specialty pharmaceutical company.

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