Eugene Melnyk pulls off a tricky $150-million refinancing

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Eugene Melnyk has finally resolved a complicated debt repayment that engrossed a Canadian pharmaceutical company and a group of sophisticated lenders.

As of Tuesday, CIT Financial Ltd., which worked on behalf of the lending syndicate, said its clients have been repaid in full, and Mr. Melnyk announced that a $150-million refinancing is now in place.

However, the journey was a tricky one.

The root issue: Mr. Melnyk holds a majority stake in Trimel Pharmaceuticals, based in Mississauga, Ontario. Yet his 53.4 million shares, amounting to a 59 per cent control position, had been pledged to the lending syndicate that wanted their money back.

To try to raise some cash, Mr. Melnyk and Trimel attempted to access the equity markets by launching a marketed offering, led by RBC Dominion Securities. The deal was both a treasury and a secondary transaction, meaning Trimel would keep some of the funds, and Mr. Melnyk would sell some of his shares directly to new investors.

Trimel hoped to use its proceeds to pay for the costs of a new drug application while Mr. Melnyk was free to use the cash to repay his loan if he so chose.

At first, the lenders gave their blessing and agreed to sit tight with the shares pledged to them, provided that an underwriting agreement for the proposed offering was signed by March 28 and that they were paid back by April 8.

Then things got tricky. On April 3, the offering was re-worked and Mr. Melnyk's secondary sale was excluded from the deal. That raised questions about how he would pay back his lenders. To buy him some time, they gave him until April 5 to come up with the money. Then they pushed the deadline back to April 12. Then again to April 15.

A spokesperson for the lenders declined to comment on the process.

Finally the news came Tuesday that a $150-million refinancing has gone through and the lenders have been repaid in full. Additionally, the shares originally pledged to them are back under Mr. Melnyk's control. No word yet on whether he will try to sell them to raise cash.

Yet even if he wants to, that may not be possible. In a statement Tuesday, it was revealed that Mr. Melnyk has again pledged a portion of these shares as security "for new loans incurred in the refinancing which also involves the release of such shares based on a price formula."

A spokesperson for Mr. Melnyk deferred questions to Trimel, but Trimel has not responded to a request for comment.

(Tim Kiladze is a Globe and Mail Reporter.)

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