ASPEN:  9,767   -334 (-3.31%)  19/06/2019 00:00

Drugmaker Aspen's shares plunge more than 50 pct on debt worries

(Adds deputy CEO comment, context)

By Nqobile Dludla

JOHANNESBURG, March 8 (Reuters) - Shares in South Africa-based drugmaker Aspen Pharmacare plunged more than 50 percent on Friday in a sign that the market is worried about the company's debts.

The fall in the shares followed Aspen's half-year results on Thursday, where the company said it would split its South African Commercial Pharmaceuticals business into two divisions as it sells non-core assets to reduce its debt.

It said its borrowings, net of cash, had increased by 6.7 billion rand ($461 million) in the six months to end December to 53.5 billion rand as a result of weakness in the rand relative to foreign currency denominated loans, payments relating to acquisitions and capital expenditure.

Deputy Chief Executive Gus Attridge said: "I believe the overriding reason would be that investors have re-rated the Aspen stock and that they are concerned by the high levels of debt we have."

Attridge told Reuters this prevented the company from making new acquisitions to drive growth.

"So growth is fairly light or static at the moment and we have this high level of debt which means that we're not in an acquisitive state."

Aspen said on Thursday it would make de-leveraging its balance sheet a priority.

The company also said it expected proceeds from its infant milk business disposal and inflows from the divestment of its non-core pharmaceutical portfolio in the Asia-Pacific region to bring down its gearing ratio covenant measure.

Aspen, which operates in 56 countries, announced the sale of its infant formula business to French company Lactalis in September.

The company's gearing ratio covenant measure will be within the specified level of net debt/normalised EBITDA of 4.0 times for the June and December 2019 periods, Attridge said at the company's result presentation on Friday which followed publication of the earnings on Thursday.

In December, Aspen said it had engaged with its creditors to negotiate a conditional and temporary adjustment to its leverage ratio covenant to allow for any delay in the infant milk disposal.

At 1041 GMT, shares in Aspen were down 30.23 percent. If they close at this level, it will be the biggest daily fall in over two decades.

Aspen's shares have fallen more than 65 percent since September. ($1 = 14.5421 rand) (Reporting by Nqobile Dludla; Editing by Susan Fenton and Jane Merriman)

2019-03-08 12:46:50

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