Concordia Healthcare Corp. T.CXR.R

Random thought on debt paydown...

[visionaryfool]

Could the Company not use the proceeds from its $350M debt to buy old debt at a discount? Just throwing out numbers but lets say old debt is trading at 70, if they buy $200M worth, that'll cancel ~$300M of interest payments. They'd be making money on the debt swap. As the Company engages in financial engineering, wouldn't it make sense for them to go down this path?

[Nossy45]

There is a lot of flexibility in CXR atm.

[Craigbad]

Here is why SP dropped  explained simply with an ebitda multiple Nossy. Just demonstration but should do the trick. A company with no debt trading at a 7.5 x ebitda would look like this 7.5 - 0 = 7.5 equity portion of muliple cxr before note issue had debt to ebitda of 6.4 7.5 - 6.4 = 1.1 equity portion of muliple after new notes debt to ebitda conservatively over 7 7.5 - 7 = .5

[Craigbad]

Sorry, should have said debt stays static, but debt to ebitda rises and the amount the debt to ebitda rises, and the equity value falls by the amount it does.

[Nossy45]

Yes I know, the EBITDA problem is making analysts job very difficult. This why prices are all over the place. There is also the issue of future drug pricing. That being said, CXR has plenty of cash and will use that to take care of near term liabilities. The UK gov is having another reading of the Health Service Medical Supplies Bill on Monday. Perhaps this will give us an idea of CRX's

[Craigbad]

Most analysts are using ev/ebitda so it smooths it out a bit. But the big shock will come with the multiple. Rbc is still using a multiple inline with peers and hasn't included the increased debt in their target. Cxr should trade at a discount to peers given the leverage, lack of visibility, missed guidance, UK headwinds, high interest payments, etc  as well. I expect Rbc to reduce the

[Nossy45]

Yes, I expect RBC's PT to be something like $4 - 5 USD. The distressed multiple is where the opportunity is

[Craigbad]

True. If you're in for a scalp you may do alright. If you're going long their could be problems. Any pricing caps/rollbacks with the UK bill and I see targets being reduced into the $1-1.75 range. The company doesn't think they'll be affected, but they said the same thing about brexit and generic competition before Q2 and look how that ended up! Lol

[Nossy45]

Yes, but the UK problems won't present themselves until end of 2016 and 2017. Between now, and the ER I expect some price appreciation. It's a decent trade!

[Lumberfeverlong]

Earliest UK bill will become law is spring 2017.  Any price rollbacks will not be retroactive and are subject to being contested by the Company.  Potential impact is on about 9% of revenues and is  likely more than 12 months away. That 9% of revenue will certainly not completely disappear.  The margins will simply be reduced if the company is unsuccessful in contesting any

[DanKwong1958]

Give me a break.  The CEO has to be TOLD by investors to BUY BACK HIS SHARES? Funniest thing I heard today!  

[Craigbad]

When the equity portion of your muliple is so low and the debt portion is so high, even a slight reduction in guidance can lead to a 50% haircut in the shareprice. You may never figure this out.

[PROtrading]

OMG x2  Lumber is a real shareholder?  And this sounds like FREAKING CAPITULATION from the last standing bull???!!! Lumber, absolutely, don't keep averaging down to wealth destruction!  Wait for certain people to buy.  MT maybe not but the guys who now control the company might.  Why did Goldman buy today hummm... Top buyer....

[MustardTiger88]

I've sent a few angry emails to investor relations, but I never seem to hear back... :P

[Craigbad]

They defered the earnout and arent making the first payment until December. I think the note issue was to keep the lights on. Even after reducing guidance they should have had the cash to make those payments and had a surplus, yet they issued more debt. Watch what they do, not what they say if q2 was any indication. If there is no flurry of insider buys before q3 blackout it could be catastrophic.

[visionaryfool]

Point taken. If the debt was to keep the lights on, than the game has been over for a while. If they are able to generate some additional cash, would it not make sense for them to buy back the debt? It would be a LOT more accreditive than buying more drugs. The new release mentioned general corporate purpose and funding of pipeline products / acqusitions. That means it can't be all of

[visionaryfool]

Guys, I think we're missing the point here. If I had a friend *cough cough JJR Capital* who had access to capital markets and thought things were going OK , why WOULDN'T I try to convince them to give me a loan for say $100M USD that I would use to erase $130M USD of old debt. The Company needs to focus on the debt. Buying back shares isn't going to do it. It would be MUCH better if

[Lumberfeverlong]

The company can't willy nilly go into the market and buy its own debt just like it can't go into the market and buy its own shares without complying with specific rules on repurchases. What do you think will happen to the value of the notes as soon as such a process is announced?  There are cost savings to be achieved but not as much as you think. Th