Valeant Increases Rate on Merger Financing as Loan Prices Slump

Valeant Pharmaceuticals International Inc. (VRX) increased the rate on a $3.55 billion loan backing its purchase of Bausch & Lomb Holdings Inc. as the price of the floating-rate debt slumped to a four-month low.

The Canadian drug distributor is offering the term loan B at 3.75 percentage points more than the London interbank offered rate, with a 0.75 percent minimum on the lending benchmark, according to a person with knowledge of the deal who asked not to be identified because the terms aren’t set. That compares with a margin of 3.25 percentage points to 3.5 percentage points proposed earlier, with the same Libor floor. The loan will be offered to lenders at 98.5 cents on the dollar, compared with 99.5 cents previously.

Valeant also is proposing to pay interest on a $500 million, three-year term loan A at 2.25 percentage points more than Libor. Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Corp., Barclays Plc, Morgan Stanley and RBC Capital Markets are arranging the deal.

Laurie Little, a spokeswoman for Laval, Quebec-based Valeant, didn’t immediately respond to an e-mail seeking comment.

Prices of the largest leveraged loans have dropped 0.99 cent this month to 97.33 cents, the least since Feb. 15, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index. Returns of 2.2 percent through yesterday on loans in the index, are outpacing the year-to-date gains of 0.5 percent on U.S. high yield bonds.

Intermediate Capital Group Plc (ICP) proposed the structure for a 400 million-euro ($524 million) collateralized loan obligation, according to four people with knowledge of the matter who asked not to be identified because the deal is private.

Armacell LBO

The CLO being arranged by Lloyds Banking Group will have a 240 million-euro portion that is expected to have the highest rating, the people said. The company plans to get 65 percent of the collateral from existing CLOs, they said.

Armacell International Holding GmbH set terms on $270 million of loans to fund its buyout by Charterhouse Capital Partners LLP, according to a person with knowledge of the offering.

A $185 million, 7-year covenant-light term loan is being offered at 4.5 percentage points more than the London interbank offered rate, with a 1 percent minimum on the lending benchmark. An $85 million 7 1/2-year second-lien loan is being marketed at 8.5 percentage points more than Libor. Credit Suisse Group AG is arranging the deal and commitments are due by noon tomorrow in New York.

CLOs are a type of collateralized debt obligation that issue securities of varying risk and return and use the proceeds to buy pools of high-yield, high-risk loans.

A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. A term loan A is sold mainly to banks. Libor is the rate at which banks say they can borrow from each other.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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