Oaktree II (OACB) Adds Backstops of Up to $250M to Alvotech Deal

Oaktree Acquisition Corp. II (NYSE:OACB) has added up to $250 million to its combination with biosimilar drugmaker Alvotech through two facilities to replace potential redemptions.

The backstops are made up of an $150 million standby equity purchase agreement (SEPA) from YA II PN, an affiliate of Oaktree II’s sponsor, and a binding term sheet providing $75 million to $125 million in debt from Sculptor Capital Management. Each of these may be pulled upon at Alvotech’s discretion with the exact amount to be determined by redemptions at close, but together they effectively backstop Oaktree II’s entire $250 million trust.

The parties also agreed to adjust the transaction’s minimum cash condition from stipulating that $300 million must come from Oaktree II’s trust and the deal’s $175 million PIPE. Oaktree II is now only required to keep the $175 million from the PIPE secured in order for the deal to close.

With redemptions high and the PIPE market tight, these moves are a nice endorsement of the transaction. Most SPAC teams likely would like to arrange similar such facilities but not all have the Oaktree team’s rich connections through its sponsor.

Oaktree II has not yet set a vote date for the deal, but do have a record date of March 22, 2022.  OACB originally envisaged closing its deal in the first half of 2022, after which Alvotech is to trade on the Nasdaq under the symbol “ALVO”.

The two sides initially announced their $2.25 billion deal on December 7. Reykjavik, Iceland-based Alvotech is developing medicines that are biosimilar to branded pharmaceuticals on the market, potentially providing them to the market at lower prices.