National Post (National Edition)
Valeant boosts loan offering to US$4.6B as demand grows
Proceeds will be used to refinance company’s debt
NEW YORK • Valeant Pharmaceuticals International Inc. increased its loan offering to almost US$4.6 billion as it capitalizes on demand to get its upcoming debt maturities in order.
The drugmaker boosted the size of a term loan sale by US$750 million, according to a statement Thursday. It’s also selling US$750 million of unsecured bonds and dropped mention of an earlier plan to sell the same amount of secured notes. The proceeds will refinance the company’s outstanding debt, according to the statement.
The debt offering, first announced last week, follows a strong earnings report where Valeant’s key gastrointestinal drug posted impressive sales growth that helped offset declines in other business areas.
It also corresponds with deepening demand for loans that’s luring investors away from junk bonds as they seek better returns and protection against interest rate risk.
That has allowed Valeant to seek cheaper financing on the term loan as it was able to lower price talk, according to a person with knowledge of the matter, who asked not to be identified as the details are private.
The unsecured bonds due 2027 may yield around 8.625 per cent, according to a separate person with knowledge of the matter. Proceeds from that sale and the loan will be used to refinance Valeant’s outstanding term loan; its 5.375 per cent and 6.375 per cent notes due 2020, 6.75 per cent notes due 2021, and 7.25 per cent notes due 2022, according to the statement.
Moody’s Investors Service rates the new unsecured bonds Caa1, seven steps below investment grade, with a stable outlook. Leverage as measured by debt-toEbitda — earnings before interest, tax, depreciation and amortization — will approach 8 times from a current 7.5 times later this year as patent expirations will erode earnings, Moody’s said.
However, that will moderate in 2019, taking leverage back down below 7.5 times. S&P Global Ratings gave the new notes a B- rating, one step higher than Moody’s.
Bridgewater, N.j.-based Valeant said last week it was seeking to amend its existing credit agreement to extend the maturity of its revolving facility to five years from the closing date, as well as modifying some covenants to enhance operating flexibility, without disclosing what those changes may be. Valeant’s strong quarter allowed the company to boost its full-year forecast, even as it continues to lose billions of dollars and contends with US$24.5 billion in debt as of March 31.
The company has been prudent in looking to delever, reducing the fair value of long-term debt by almost US$1 billion through the first three months of this year. Valeant also said it plans to change its name to Bausch Health Companies Inc., effective in July.
Goldman Sachs Group Inc., Barclays Plc, Citigroup Inc., Deutsche Bank AG, DNB ASA, Jpmorgan Chase & Co., Morgan Stanley and Royal Bank of Canada are managing the bond sale, according to the second person with knowledge of the matter.
The bonds were to be priced on Thursday, the person said.