UPDATE 2: Biocon Biologics Targets Benchmark Size for Debut USD Bond Issuance

Mon Sep 02, 2024 08:19 AM ET: 

Biocon Biologics Ltd.’s senior management told investors in Hong Kong during a non-deal roadshow today, Sept.2 that the company would be targeting a benchmark USD-denominated bond issue to refinance the outstanding $950 million of its original $1.2 billion loan put in place for the 2022 acquisition of its partner Viatris Inc.’s biosimilars business, two sources familiar with the situation said.

The company is likely to target a tenor of five to seven years for the bonds, the sources familiar and a source close said, adding that the company wants to save on the amortization payment and a longer tenor bond will help the company reduce its near-term debt servicing obligations.

While the amortization schedule for the acquisition loan starts from fiscal year 2026, with 25% amortization pay due in the same fiscal year, it prepaid $250 million last year, the company told investors, sources stated. The loan is priced at SOFR+190 bps, the sources said, adding that the company is keen to price the inaugural USD bond under SOFR+190 bps. The biosimilars manufacturer has told the investors that in case it proceeds with the bond issue, the security package would be similar to that of the outstanding loan, the sources said. Management did not explain why they prepaid the loan ahead of the amortization schedule, the sources stated.

The Bengaluru-based company is targeting a credit rating in the BB area, the sources said.

The company has mandated Bank of America, Citi, HSBC and Standard Chartered Bank so far the planned issue, the sources said.

Regarding the 2022 acquisition, the BSE-listed Biocon Ltd. subsidiary needs to pay another $160 million to Viatris as deferred payment, the sources said, adding that the company is in discussions with Viatris to defer the payment further.

Biocon Biologics’ cash as of fiscal year ended March 31, 2024 was $110 million. The consolidated cash for parent Biocon Ltd. stood at $372 million, according to the company presentation seen by Reorg.

Biocon Biologics has about $1.4 billion in total debt, of which $950 million is outstanding acquisition debt, $202 million in bilateral bank debt and $248 million in working capital, the presentation shows. Its EBITDA for FY’24 is $263 million. The company did not include the debt raised via issue of optionally convertible debentures to its parent in the presentation.

Investors have expressed apprehension over the company’s high debt and are seeking additional information on the company’s business model. Additionally, Biocon Biologics is still in the process of getting approval from the U.S. Food and Drug Administration for around four new products, sources said. The company has also told investors that it is considering an initial public offer in 12 to18 months which will also help it de-lever, the sources added.

The investors Reorg spoke to said that the company should instead consider a foreign currency convertible bond or an amortizing bond given the long-tenor being targeted by the company and the equity risk the potential bondholders will have to undertake.

Biocon could not immediately be reached for comment.

Tue Aug 20, 2024 02:47 AM ET: Indian biosimilars manufacturer Biocon Biologics will conduct non-deal roadshow in Hong Kong and Singapore in the first week of September for its potential inaugural USD public bond offering, a source close to and a source familiar with the development said. HSBC and Standard Chartered Bank are organizing the investor meetings, the sources said.

Company management will meet investors in Hong Kong on Sept. 2, and in Singapore on Sept. 3 and Sept. 4.

Reorg first reported on Aug. 13 that Biocon Biologics is looking to raise around $600 million to partly refinance an outstanding $950 million loan raised for its 2022 acquisition of Viatris. Inc.’s biosimilars business.

Biocon could not immediately be reached for a comment.

–Malvika Joshi

Biocon Biologics Plans USD Public Bond Issue to Refinance Debt Backing Acquisition of Viatris’ Biosimilars Business

Bengaluru-based Biocon Biologics Ltd. is planning to issue around $600 million USD-denominated public bonds to refinance debt taken on for its 2022 acquisition of U.S. pharma company Viatris Inc.’s global biosimilars business, two sources close to the development said. The company has mandated Citi, HSBC and Standard Chartered Bank for the bond issue, which is likely to be announced in the next two months, the sources said.

The Indian biosimilars manufacturer is looking to refinance an around $950 million outstanding loan through a mix of dollar bond and loan, the sources said. While the company has also considered issuing INR-denominated non-convertible debentures to partly refinance the debt and appointed HDFC Bank as the arranger for the transaction, the deal is far from closed and the company is tilting in favor of raising dollar debt as the business is export-oriented, the sources said, adding that cost wise raising dollar debt is preferred.

Biocon Biologics is a subsidiary of BSE-listed biopharmaceutical company Biocon Ltd. In November 2022, it closed a $3.34 billion deal to acquire the global biosimilar portfolio of business partner Viatris in a cash and equity deal. As part of the deal, Biocon Biologics issued around $1 billion compulsorily convertible preference shares to Viatris, and its $2 billion cash payment was partially funded by a $1.2 billion sustainability loan, the sources said.

The company is now looking to refinance the outstanding $950 million in the sustainability loan, the sources said.

Biocon did not respond to requests for comment.