Endo Unsecured Noteholders Announce Formation of Group and Communications with Company

NEW YORK, June 27, 2022 /PRNewswire/ -- Institutional investors managing in excess of $20 billion have organized a group (the "Group") of holders of unsecured notes (the "Unsecured Notes") issued by certain subsidiaries of Endo International plc (collectively, "Endo," or the "Company").  As communicated to the Company and its board of directors (the "Board"), including pursuant to a letter sent on June 21 and a meeting on June 24, the Group is prepared to engage constructively on solutions that benefit all stakeholders.

To that end, the Group has proposed several out-of-court transactions, including having the Company commence a cash tender offer or commence a debt-for-debt exchange, that the Group believes would create substantial value in a manner consistent with the Board's fiduciary duties.  In the Group's view, such transactions could realize meaningful debt discount and reduce interest expense while leaving the Company with ample liquidity to continue operating its business and investing in its pipeline.

The Group has further emphasized to the Company that a near-term bankruptcy filing is unnecessary due to Endo's strong liquidity, significant maturity runway and considerable free cash flow generation.  Notably, the Company recently disclosed that as of March 31, 2022 it had over $1.4 billion of unrestricted cash, approximately $640 million of availability under its revolver, no "Material Indebtedness"¹ due until October 2024 and only approximately $660 million of total funded debt maturities through the end of March 2027.²  At the same time, the Group communicated that, in its view and in line with the Company's own recent disclosure, Endo does not appear to face any looming covenant breaches or unmanageable near-term litigation payments.³ In fact, in advance of its June 9, 2022 annual meeting, the Company touted the "outstanding performance" of its management to justify a compensation package to three of its top executives of almost $50 million, including nearly $20 million of cash "prepaid" in late 2021.⁴  It is perhaps not surprising, then, that market observers expect the Company to generate levered free cash flow in each of the next several years.⁵

In addition to stressing that a near-term bankruptcy filing is not necessary, the Group has also emphasized to the Company and Board that such a path could destroy significant value for stakeholders. In this regard, the Group sees little prospect of Endo filing for bankruptcy in the coming months with a framework for a confirmable plan. Indeed, in the Group's opinion, a plan cannot be confirmed if it does not provide material recovery to the Unsecured Notes in light of, among other factors, the likely existence of meaningful unencumbered value, the structural seniority of the Unsecured Notes and the overall value of the enterprise. With a plan likely to be out of reach in the near term, the Group thus fears that bankruptcy, which is often expensive and time consuming, will be particularly destructive for Endo. 

As a result, the Group has urged Endo and the Board to pursue a different, more constructive path.  As part of this effort, it has retained White & Case LLP and GLC Advisors & Co., LLC as legal and financial advisor, respectively.

Holders of Unsecured Notes who wish to learn more about the Group and its objectives are encouraged to reach out to [email protected] and/or [email protected].

This press release contains certain forward-looking statements, including statements that include the words "proposed" and "expect."  Such statements reflect current expectations and are subject to risks and uncertainties. The statements are based on assumptions, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from those projected, expressed or implied by these forward-looking statements. These forward-looking statements speak only as of the date they are made and we do not undertake any obligation to update these statements.

¹ In its most recently executed credit agreement, Endo defines "Material Indebtedness" as certain debt with an aggregate principal amount exceeding $150 million.  See Amendment and Restatement Agreement, dated as of March 25, 2021, available at https://www.sec.gov/Archives/edgar/data/1593034/000119312521094652/d120772dex101.htm

² Endo International plc, Form 10-Q for Quarterly Period Ended March 31, 2022 at 18, 40, 41, available at https://www.sec.gov/Archives/edgar/data/1593034/000159303422000044/endp-20220331.htm.

³ Id. (with the Company noting that "[it] currently expect[s] our operating cash flows, together with our cash, cash equivalents, restricted cash and restricted cash equivalents, to be sufficient to cover our principal liquidity requirements over the next year...").

⁴ Endo International plc, Schedule 14A (April 28, 2022) at 31, 53, available at https://www.sec.gov/Archives/edgar/data/1593034/000119312522125607/d46171ddef14a.htm.

⁵ Consensus is per S&P Capital IQ as of the date of this press release.  Levered free cash flow as used herein denotes cash from operations less capital expenditures prior to litigation-related payments.

SOURCE White & Case LLP