Endo cap structure rides high on New York lawsuit settlement – Market React

Endo International’s debt and equity strengthened today after the company announced last night that it settled three New York State opioid litigation cases. A jury trial for liability has been ongoing since June 2021. 

As part of the settlement, the company will pay USD 50m without an admission of wrongdoing, fault or liability. The specialty pharma company added that it is still focused on a global settlement and continues to explore strategic alternatives. 

In August, Endo hired Alvarez & Marsal to assess options that could include a balance sheet restructuring, as it confronts litigation and a heavy debt load, as reported

The company’s common stock jumped to USD 3.15 per share and a market cap of USD 722.682m, up 50% from yesterday’s close. 

Endo’s USD 1.26bn 6% unsecured notes due 2028 traded today as high as 69.5 to yield 12.862%, compared to trades at 64.25 to yield 14.419% yesterday (9 September), according to MarketAxess. Its USD 941m 9.5% second lien secured bond due 2027 climbed to par, compared to trades at 97.25 to yield 10.127% yesterday, according to MarketAxess. 

The issuer’s USD 2bn Libor+ 500bps TLB due 2028 is quoted in a 98/99 context, compared to quotes at 96.76/97.719 yesterday, according to a trader. 

Endo recently settled opioid-related charges in Tennessee for USD 35m. The company had been facing a default judgment in Tennessee for alleged discovery improprieties, but it did not admit any wrongdoing as part of the settlement.

After the Tennessee settlement, it was estimated that the tab to settle all of Endo’s opioid-related litigation could hit the USD 2bn-USD 3.5bn range, well north of the USD 1.6bn figure Mallinckrodt struck to settle all its opioid-related litigation, as reported by Debtwire. As of 29 April, there were roughly 20 cases filed by or on behalf of states, around 2,900 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities, 300 cases filed by hospitals or other third-party payers and 190 cases filed by individuals, according to SEC filings.

Endo is also party to a patent infringement trial related to its profitable Vasostrict business, in which a Delaware district court judge ruled that the company had not established that a new product from rival Eagle Pharmaceuticals will infringe on its patents.   

Although the company said it plans to appeal the decision, the trial led some investors to recalculate valuations to account for the possibility that second liens—or even the first lien tranches—could be impaired in the event of a restructuring.

The Vasostrict business line is accountable for roughly 25% of the company’s overall EBITDA and commands a higher multiple than other Endo segments.

Eagle Pharmaceuticals and its peer Amneal Pharmaceuticals are trying to launch generic vasopressins, but Endo claims that would infringe on its patents. If Endo loses, the lower multiples commanded by generics could lead to a total enterprise value of around USD 7bn-USD 8bn, sources said.

Earlier this year, a group of Endo crossholders organized with counsel Paul Weiss amid the ongoing opioid-related litigation. The consortium of crossholders, which is weighted towards the unsecured bonds, later hired Perella Weinberg Partners as its financial advisor. Meanwhile, a group of lenders is working with Gibson Dunn and Evercore.

2021 Debtwire

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