Valeant Pharmaceuticals International Inc. is offering its lenders a one-time fee and extra interest on its loans in exchange for waiving a default caused by its delayed earnings filing and loosening some restrictions on its debt load.
The company is offering creditors a 50 basis-point fee and has also proposed to boost the interest on the term loans it has outstanding by 0.5 percentage point, according to two people with knowledge of the matter, who asked not to be identified as the information isn’t public.
Valeant is asking its lenders to extend a deadline for filing its annual 2015 financial statement to May 31 from March 30, it said in a statement Wednesday. There’s an additional fee the company is offering to pay if it needs to extend that deadline further, the people said. Investors have a week to decide on the proposal, the people said.
The drugmaker is also seeking to loosen restrictions on its credit pact that govern a measure of earnings the company needs to maintain relative to its annual interest expense, according to the statement. Valeant is asking lenders to loosen its interest coverage maintenance covenant to give it "additional cushion" to comply.
The interest-coverage ratio was set to jump to three times from 2.25 times, with that level set to be tested before the end of June, according to its agreement with lenders. Valeant is now seeking approval from its investors such that the level doesn’t have to be tested until next year.
A spokeswoman for Valeant couldn’t immediately be reached for comment.
The proposal to lenders would restrict Valeant’s ability to make certain acquisitions and other investments, and to pay dividends until its financial statements are filed and the company meets certain leverage ratios.
Valeant had been required to filed its 10-K statement before March 15, triggering a technical default. It also risks defaulting on other debt agreements if it doesn’t file by April 29. The company said Wednesday it still expects to file the statements by April 29. Its amendment proposal needs to be approved by more than 50 percent of lenders, Valeant said.
Valeant’s $31 billion debt load has eclipsed its stock market value as the company’s shares have been battered. Earlier this month the company cut its 2016 guidance and held a conference call where it had to correct its earnings forecast issued just hours before. Its shares plunged 51 percent on the day and are down about 70 percent this year.
In recent months, the company has been questioned over its high drug prices, criticized by presidential candidates and investigated by Congress, and had to cut ties with a mail-order pharmacy that critics said it was using to inflate sales. Outgoing chief executive officer, Michael Pearson, was subpoenaed to testify at an April hearing by a Senate committee investigating drug price hikes.