Goldman Sachs Group Inc. is facing an uphill battle in selling almost $2.8 billion of debt for Concordia Healthcare Corp. amid a drug-pricing controversy in the pharmaceutical industry, according to people with knowledge of the matter.
The Canadian company is trying to finance the purchase of drugmaker Amdipharm Mercury Ltd. Underwriters led by Goldman Sachs are finding tepid demand for a $1.1 billion term loan and a 500 million-pound ($762 million) loan they are marketing to back the takeover, said the people, who asked not to be identified because the information isn’t public. They also plan to issue as much as $950 million of bonds.
Concordia, whose banks have committed to the financing, intends to complete the acquisition next week.
Marija Mandic, a Concordia spokeswoman and Michael DuVally, a spokesman for Goldman Sachs, declined to comment.
Concordia, which owns and markets pharmaceutical products, has seen its stock lose more than 60 percent since the first week of September. If Concordia can’t raise the debt in capital markets, it can rely on backup financing provided by lenders including Goldman Sachs, Credit Suisse Group AG, Royal Bank of Canada and Jefferies Group, according to a Sept. 25 company filing.
The company is offering to pay 4 percentage points to 4.25 percentage points more than the London interbank offered rate on the $1.1 billion loan with a one percent minimum on the lending benchmark, according to data compiled by Bloomberg. The debt is being marketed at 99 cents on the dollar.
Pharmaceutical companies have been under scrutiny over drug-price increases deemed excessive, following the decision by Turing Pharmaceuticals to boost the price of its newly acquired drug Daraprim. With the focus expanded with congressional pressure and the stance taken by Democratic presidential candidates, who have vowed to reform drug-pricing tactics, companies in the industry have seen their bond and stock prices plunge.
Sucampo Pharmaceuticals Inc., which markets drugs for treating constipation, is boosting the yield it’s offering on a $250 million loan, to complete the sale, according to two people with knowledge of the matter, who asked not to be identified as the information isn’t public.
The drugmaker’s loan, which was initially being offered at 8 percent, will be used to finance the purchase of Japanese company R-Tech Ueno. Lender commitments were due Oct. 13.
"Despite current market conditions, we are on track with our deal and we remain confident that we will fill the book," said Silvia Taylor, a spokeswoman for Sucampo.