Teva Pharmaceutical Industries Ltd. shares rose 2.3% in premarket trade Tuesday after the company announced it has made amendments to its U.S. dollar and Japanese yen term loan and revolving credit facilities, which the company said will provide it “greater flexibility.” The company, which has sold a number of assets to pay down debt, including its specialty global women’s health business, “appears to have addressed the most important near-term overhangs and I expect the equity to stabilize,” said EvercoreISI analyst Umer Raffat. Under the Tuesday announcement, Teva’s amended leverage ratio covenants in its credit agreements allow a maximum leverage ratio of five times through and including the end of 2018, declining gradually to 3.5 times by the end of 2020. Teva said that as of the end of June, the aggregate principal amount collectively outstanding under the U.S. dollar term loan facility was $5 billion and was $1.4 billion under the Japanese yen term loan facilities and, under the U.S. dollar revolving credit facility, the aggregate committed principal amount was $4.5 billion. Teva only has to pay a one-time fee for the renegotiated covenants, Raffat said, rather than ongoing incremental interest, and the news allows for “a fair amount of cushion” for the company. While generic threats to Teva’s key multiple sclerosis drug Copaxone continues to pose a problem for the company, “here’s the good news: between Teva’s divestitures already announced [and] additional ones quoted in press, as well as cash flow from operations over the next 2-3 quarters, Teva can simply pay off the ~$6B in debt that is tied to the covenants,” Raffat said. Teva shares have plummeted 45.8% over the last three months, compared with a 2.1% rise in the S&P 500 .
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