Here’s the good news: Valeant Pharmaceuticals has raised $US1.1 billion dollars in asset sales it will use to pay down debt. It’s also taking this opportunity to refinance more of its $US30 billion outstanding debt load.
That’s also the bad news. The stock is down over 4%, adding to its 20% slide over the last week.
Last Tuesday on the company’s earnings call, Valeant execs told investors they “plan to be in compliance with the maintenance covenants in our credit agreement through 2017.”
Now, if the company can refinance its debt — even if it ends up needing to make more onerous payments — that’s technically true. But that isn’t what investors are looking for.
After a tumultuous year and a half in which the company has become the subject of multiple federal investigations, hired and fired a CEO and board, and seen its execs testify before an angry Congress, they were looking for a Valeant that can manage to stick to its 2017 guidance without drama.
Across Wall Street, analysts are panning the move. Here’s David Maris from Wells Fargo:
“Refinancing, to us, is a clear indication that the $US8 billion of asset sales VRX hoped for is off the table. We consider VRX’s refinancing as a last attempt to salvage the company from what we would consider a likely default and restructuring. However, this is not likely the last we have heard of these risks…”
More on what Valeant is trying to do, from the company’s release:
“Valeant is seeking to refinance and amend the Company’s existing credit agreement (the ‘Credit Agreement’), borrow new Term B loans under the Credit Agreement and issue new secured debt securities (together, the ‘Refinancing’). The Refinancing is expected to have the effect of extending the maturity date of the revolving facility and the Term B loans that mature prior to 2022, repaying all of the outstanding Term A loans, removing the maintenance covenants from the Term B loans, modifying the maintenance covenants under the revolving facility, modifying certain other provisions of the Credit Agreement and repaying a portion of the Company’s outstanding 6.75% Senior Notes due 2018.
“The Refinancing is subject to market and other conditions and is anticipated to close in the first quarter of 2017. However, there can be no assurance that the Company will be able to successfully complete the Refinancing, on the terms described above, or at all.”
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