December 14, 2018 / 9:59 AM / a year ago

UPDATE 1-Aspen Pharmacare drops on debt worries and revenue forecast

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JOHANNESBURG, Dec 14 (Reuters) - Shares in Aspen Pharmacare fell more than 8 percent on Friday, a day after the South African drugmaker said it had negotiated a temporary relaxation of its lending agreements and forecast little growth in full-year revenues.

The company, which is finalising the sale of its infant formula business, said on Thursday it had agreed a relaxation of its lending agreements with creditors should the transaction not be completed by Dec. 31.

Proceeds from the 12.9 billion rand ($897.7 million) sale of the business to French company Lactalis will be used to reduce debt.

Jitters about the company’s borrowing levels contributed to a 35 percent share price tumble in just over a week after it posted its full-year results.

“The market is spooked by the fact that the debt ratio is not coming down quick enough and realising that it may have to sell more business in the future in order to cover its debt especially when it is growing at such levels,” said Greg Katzenellenbogen, director at Sanlam Private Wealth.

Aspen flagged revenue growth of between 1 percent and 4 percent, with a weaker performance across Europe offseting a stronger showing for commercial pharmaceuticals in most emerging markets.

“A company like Aspen is considered a growth stock so revenue of between 1 and 4 percent is just not good enough,” said Vasili Girasis, equities trader at BP Bernstein.

At 0955 GMT, the shares were down 7.68 percent at 130.76 rand

$1 = 14.3390 rand Reporting by Patricia Aruo; Editing by Jason Neely and Mark Potter

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