Investors are dumping Valeant Pharmaceuticals International Inc.’s bonds as Democrats in the U.S. House seek to subpoena the company for documents relating to drug price increases.

The company’s $3.25 billion of 10-year notes issued in March dropped 5.6 cents to 94.25 cents on the dollar at 3:59 p.m. to yield 6.96 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt has plummeted from above par earlier this month.

A group of 18 Democratic representatives wrote in a letter to Jason Chaffetz, the Utah Republican who is chairman of the House’s committee on oversight and government reform, that Valeant is acquiring and hiking the price of potentially life-saving drugs to maximize its profit. The sell-off of the securities comes amid rising investor concern about risky borrowers in the high-yield bond market as the commodities slump spills over to other sectors.

“This buying spree has been almost entirely funded by debt, which has swelled to nearly $32 billion and now costs $1.2 billion a year in interest -- which is why Valeant maintains one of the weakest credit profiles by far of any major drug company,” Gimme Credit analyst Vicki Bryan, wrote in a research note today.

‘Most Vulnerable’

Increasing prices by as much as 500 percent on life-saving heart treatment drugs at the expense of "the sickest and most vulnerable patients" may have created a "public relations crisis" that’s increasingly difficult for Valeant to diffuse, according to Bryan.

"If Valeant is ultimately forced to reduce its excessive pricing we suspect the house of cards artificially fueling its profits could collapse, leaving it also far less capable of servicing the massive mountain of debt it layered on to fund its spending spree," Bryan wrote.

Renee Soto, a spokeswoman for Valeant who works at Sard Verbinnen & Co., didn’t immediately respond to a phone call and e-mail seeking comment.

At KDP Investments Advisors Inc., credit analyst Mark McCabe, said the representatives were focusing on a small part of the company’s business. 

"They’re getting creamed because of the congressional inquiry, not the acquisitions they made," McCabe said in a telephone interview. "Valeant has hundreds of drugs, and they’re cherry picking two that have substantial prices increases."

The company added two drugs, Nitropress and Isuprel, with its "minor" acquisition of products from Marathon Pharmaceuticals LLC earlier this year, according to McCabe.

Valeant’s strategy has long been to grow through acquisitions. The company has announced about dozen purchases in the past year valued at a combined $15 billion, according to data compiled by Bloomberg.

The company’s shares slid 17 percent, to $166.50.

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