A Securities and Exchange Commission inquiry into Biovail Corp.'s accounting and financial reporting practices and rating agency concerns over declining revenues and increasing debt were not enough to tamp down syndication of the company's $400 million revolver, which was oversubscribed. Brian Crombie, the company's cfo said, Biovail's banks believe in the company. "In an environment where our stock is at a 52-week low and both rating agencies have put us on credit watch with negative outlook, for the banks to review our financial projections and to commit to lending us that money and to oversubscribe to that commitment is a testament to their belief and commitment to our overall business strategy," Crombie said.
Scotia Bank led the facility and Bank of Montreal served as syndication agent. Other lenders include Credit Suisse First Boston, UBS, J.P. Morgan, Citibank, The Royal Bank of Canada and HSBC Bank Canada.
The SEC inquiry came about in November. After the company lowered its revenue and increased its operating expense guidance for 2004, Moody's Investors Service and Standard & Poor's took action. Earlier this month, Moody's placed the company on review and S&P revised its outlook from stable to negative. Those moves came before the credit hit the market.
But the deal filled up. Biovail's previous $600 million revolver was set to mature March 25, though the Toronto-based company did have the right to term out the approximately $300 million loan balance by making eight equal quarterly payments. "Given our cash flow projections and our business plans for this year, which consists of out-licensing of products rather than acquisitions, we don't need $600 million. Four hundred million is more than enough revolver capacity," Crombie said. The new loan is a 364-day facility, but if it's not renewed by the banks at the end of the year, the company has a right to term it out over a subsequent 12-month period.
Scotia led Biovail's previous facility. "They've provided excellent service for us in the past and continue to do so," Crombie noted. Pricing is not disclosed but the facility carries the same spread as the previous one, which Crombie said is "an attractive interest rate." There is currently $300 million drawn on the revolver.