LPC: Valeant pays up for flexibility

By Kristen Haunss
NEW YORK, March 30 (Reuters) - Valeant Pharmaceuticals (NYSE:VRX)
International VAPI.UL is offering to increase by 50 basis
points the interest rate it pays to loan lenders if they agree
to relax covenants and waive potential defaults on its
financing, according to sources familiar with the discussion.
By paying up on its loans, the drugmaker is seeking to stave
off defaults on its more than US$30bn of debt after it missed
the filing deadline for its regulatory financial forms on March
15.
The company is also offering an extra 50 basis points fee on
committed loan amounts to lenders that approve the changes, the
sources said.
Holders of more than 50% of the company's loans need to
approve the amendment. Lenders must let Barclays (LON:BARC) know by April 6
if they will agree to the changes, sources said.
The company said Wednesday that it is seeking to extend the
deadline for filing its Form 10-K to May 31 and push forward the
limit to file its Form 10-Q for the quarter ending March 31 to
July 31, according to a news release Wednesday. The proposal
would also waive any cross-default to Valeant's indentures that
arose when the 10-K was not filed in mid-March.
Valeant said earlier this month that it would request a
waiver from its loan lenders to extend the deadlines to file its
Form 10-K for December 31, 2015 and its Form 10-Q for the
quarter ended March 31, 2016, according to a March 21 news
release.
If Valeant needs an additional extension to July 31 to file
its 10-K, it will pay lenders another 25 basis point fee.
The company is also asking lenders to modify the interest
coverage maintenance covenant and some financial definitions to
allow for additional cushion on the covenants in its credit
agreement, according to the news release Wednesday.
The proposed amendment would restrict the company's ability
to make certain acquisitions and would also require it to apply
"substantially all net asset sale proceeds" to prepay its term
loans, according to the news release.
If the company satisfies its reporting requirements and its
debt compared to earnings before interest, taxes, depreciation
and amortization (Ebitda) falls below 5.25 times, the interest
payment to lenders would step back down to the original rate,
sources said.
Leverage was about 5.8 times at the end of 2015, Linda
LaGorga, Valeant treasurer, said on a March 15 conference call.
The company expects net leverage to be about 5 times by the end
of 2016, according to a transcript of the call.
Lenders must let Barclays know by April 6 if they will agree
to the changes, sources said.
A Barclays spokesman declined to comment. A Valeant
spokeswoman didn't immediately return a telephone call seeking
comment.
At the end of 2015, Valeant had a US$250m revolving line of
credit; a US$140.4m A-1 term loan A; a US$137.3m A-2 term loan
A; a US$1.88bn A-3 term loan A; a US$951.3m A-4 term loan A; a
US$1.09bn D-2 term loan B; a US$835.1m C-2 term loan B; a
US$2.53bn E-1 term loan B; and a US$4.06bn Series F term loan B,
according to a March 15 news release. The company also had
US$19.2b of senior notes.