RE:RE:RE:Everyone knows Managment is trying to get something done..
I believe the issue is that the free cash flow is getting awfully close to not being able to service their debt.
I did some quick math after the earnings and it come out something like this:
Revised Adjusted Forecast = $500M (low end) - $283 already achieved = $217 for remainder of year. Assuming NO change to the business for next year, the business should generate $432M in adjusted EBITDA ($217x2). The interest expense is $121M (note 11) for 6 months so $242M for full year. Thus, $432 - $242 = $190M of Adjusted EBTDA left. Principal repayments are ~$160M (assuming bridge term loan gets fully paid out). That leaves ~$30M of Adjusted EBITDA left assuming NOTHING else goes wrong.
We all know their comment on Donnatel being flat were complete and utter horse SHIAT so that's likely going to decline if not go to $0. They have a gross profit of ~73% YTD. This means that, all else being equal, if their sales decline by more than $40M next year, they won't be able to cash flow their debt.
Again, they have the option to defer the bridge loan for another 5 years at something like 11% interest rate so its not immediate default but its cutting it DAMN close no? Imagine if sales in North American division fell by $100M due to Nilandron and other generic competition.
I think that's the short's POV. Yes, technically, their debt is not due for 5 years at least but they will have issues cash flowing it on declining revenues. That is unless AMCO / new products somehow makes up for the revenue declines in NA divison.