| Arthur Wong |
aaiPharma's bank debt jumped up right under par after the company announced that it had received a commitment for a $15 million revolver and $120 million term loan underwritten by Silver Point Finance and arranged by Banc of America Securities. The company's existing term loan traded in the mid-99 range following the news. Proceeds from the new facility and sale of the company's M.V.I. and Aquasol product line have been tagged to pay down the existing bank debt. The company's loans were quoted as low as the 94-96 context at the beginning of the month. aaiPharma's new loan comes as an alternative to a previously announced $40 million priority revolver with B of A. Arthur Wong, a Standard & Poor's analyst, said the credit is meant to alleviate the company's immediate liquidity pressures. aaiPharma lost access to the $100 million revolver under its previous facility led by B of A, Wachovia Securities and CIBC World Markets, after disclosing the need to materially adjust financial information. Soon after, aaiPharma obtained a commitment from B of A for the $40 million revolver (LMW, 4/5). Calls to William Ginna, executive v.p. and cfo of aaiPharma, were referred to a spokeswoman, who did not provide comment by press time.
The new $135 million credit has a two-year maturity and is priced at LIBOR plus 61/2%, according to an aaiPharma filing. In the event of default, interest will accrue at a rate of 2% per year above the original rate. There is also a 3% prepayment fee for the first nine months and 11/2% for the next nine months. Silver Point officials referred calls to spokespeople, who declined comment.
In order to access the new credit facility, aaiPharma will have to complete the M.V.I. and Aquasol sale. The company also needed to get the approval of its senior subordinated bondholders, who had until last Friday after LMW went to press, to give their consent. Loan market traders said there was little risk that the bondholders would not consent to the new facility. "No one wants [the company] to fail," noted one. But the company has $9.6 million of past interest due to bondholders. Wong said the new facility and proceeds from the product sales will also be used to pay a $31 million product right payment, a possible $14 million Darvocet product line extension acquisition, and the interest payment to bondholders.