Exclusive: Valeant lenders to prepare tough demands for default talks – sources

Thu Mar 17, 2016 1:07am EDT
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By Kristen Haunss and Carl O'Donnell

NEW YORK (LPC/Reuters) - Creditors of Valeant Pharmaceuticals International (VRX.N: Quote) (VRX.TO: Quote), which has been in violation of lender agreements since Wednesday, are beginning to demand new terms that could further pressure the drugmaker's business model, according to three people familiar with the matter.

Valeant said on Tuesday it would not meet a March 15 deadline for filing its annual financial statements with securities regulators, putting it in danger of defaulting on its $30 billion debt load. Valeant also sharply reduced its forecasts for 2016 profits.

Shares of the company fell more than 50 percent on the news, cutting its market capitalization to $11.4 billion and deepening concerns about a business model that has relied largely on acquisitions fueled by cheap debt.

The shares have sunk to $33.54 from a high of $263.70 in August as Valeant has come under growing scrutiny for sharp price hikes on its medicines and its ties to specialty pharmacy Philidor Rx.

The risk of default has offered creditors an opportunity to attempt to renegotiate core elements of their agreements with Valeant, potentially saddling the company with higher costs of debt and more restrictions on how it deploys capital, according to people familiar with the matter.

The sources could not speak on the record because they were not authorized to talk to the media.

"This very quickly dematerializes from a growth story into a company that's really standing still, just looking to right its capital structure," said Jim Sanford, portfolio manager for Sag Harbor Advisors, which does not hold Valeant shares. "There's not a lot of equity and market cap to go to, to issue equities and convertible bonds against."

Valeant declined to comment.   Continued...

The headquarters of Valeant Pharmaceuticals International Inc., seen in Laval, Quebec November 9 2015.  REUTERS/Christinne Muschi