Alkermes' Debt Refinanced

Recently, Alkermes plc ( ALKS - Analyst Report ) announced the successful completion of the refinancing of its previously outstanding senior secured bank debt. Through this move, the company brought down its total debt outstanding by $75 million to $375 million.

Alkermes further announced that the new term loans will carry a lower blended interest rate of 4.4% as opposed to the previous blended interest rate of 7.6%. Moreover, the company expects the debt refinancing to result in annual cash interest savings of approximately $18 million.

Alkermes stated that the new debt includes senior secured, covenant-lite first lien term loan facilities. The facilities consist of a $300 million, seven-year term loan bearing interest at LIBOR (London inter-bank offer rate) plus 3.50% in addition to a $75 million, four-year term loan carrying interest at LIBOR plus 3%. LIBOR is subject to an interest rate floor of 1% for each of the term loans.

Alkermes expects to incur a one-time cost of approximately $14 million in the second quarter of fiscal 2013. The charge comprises a prepayment premium of $2.8 million coupled with the write-off of deferred financing charges and original issue discount pertaining to the previous debt.

Following the successful completion of the refinancing, Alkermes broadened its adjusted earnings guidance for fiscal 2013 (ending March 31, 2013). The company now expects to end fiscal 2013 with adjusted earnings in the range of 69 – 84 cents per share, as opposed to the previously forecasted range of 62-77 cents per share. Moreover, Alkermes upped its projected range for free cash flow for fiscal 2013 to $70 - $90 million from $60- $80 million.

Alkermes, which has been performing well since its purchase of Elan Corporation’s ( ELN - Snapshot Report ) drug delivery unit last year, carries a Zacks #1Rank (“Strong Buy” rating) in the short run.