Valeant Gets Default Notice From Bondholders on Delayed 10-Q

Valeant Pharmaceuticals International Inc. received a notice of default from some of its bondholders because of a delay in filing its first-quarter financial results, the company said Thursday.

The notice from holders of the company’s $1 billion of 5.5 percent notes that mature in 2023 started the clock on a 60-day grace period, giving Valeant until July 18 before the bondholders can demand immediate repayment if the company hasn’t filed the statement, according to a regulatory filing Friday.

The default notice also triggers a provision in its credit agreement that allows its most senior lenders to demand repayment if the financials aren’t filed by July 3, bringing forward the July 31 extension previously worked out with lenders. There is no grace period under the amended agreement, meaning loan investors will be able to demand accelerated repayment on $12.7 billion of loans if the new deadline isn’t met.

“We view this as a logical step by bondholders,” Murali Ganti, a credit analyst at Citigroup Inc., said in a note to clients. “By delivering a notice of default, holders of the 5.500% of 2023 now have a seat at the table to re-negotiate terms should the company need extra time to file its financials."

The company in its statement reiterated plans to file its quarterly financials on or before June 10.

The Laval, Quebec-based drugmaker has endured multiple controversies in recent months related to its business practices, accounting and drug pricing. It’s facing investigations from Congress and the U.S. Securities and Exchange Commission. It delayed filing the 2015 financial statements while an ad-hoc committee of the board reviewed its relationship with mail-order pharmacy and former distribution partner Philidor Rx Services LLC.

Last month, Valeant received two rounds of default notices from bondholders after it delayed filing its annual report and breached its bond pact. It ultimately filed the 10-K on April 29.

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