Valeant Gets Lenders’ Blessing to Loosen Debt Requirementsby
Valeant Pharmaceuticals International Inc. received support from a majority of its lenders to loosen terms on its credit agreement, giving it additional flexibility to tackle its $30 billion debt load, according to a company statement on Thursday.
Under the amendment, the drugmaker will be able to relax a condition that governed a measure of its earnings relative to interest expense, will gain the ability to sell more of its assets, and will be allowed to issue secured bonds with shorter maturities and other debt to repay term loans.
The company embarked on the credit-agreement amendment process after affirming an annual forecast that allayed investor concerns. However, some of those fears were rekindled after a report last week that it was the target of a criminal probe by federal prosecutors. The drugmaker needed the approval of more than 50 percent of the lenders on its roughly $12 billion of loans and revolver to make the revisions.
The amendment will lower Valeant’s interest coverage covenant to two times. It was supposed to step up to 2.75 times starting in the second quarter. Valeant will pay a one-time amendment fee to lenders of 0.25 percentage point of loans and commitments. It will also boost interest rate margins by 0.5 percentage point.
The company’s shares jumped as much as 5.4 percent to $31.62 in pre-market trading on Thursday. They gained 13 percent to close at their highest price since May on Wednesday after two stock analysts raised their ratings and issued new price targets this week.