Valeant bonds plunge on short-seller report

Wed Oct 21, 2015 2:49pm EDT
 
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By Davide Scigliuzzo

NEW YORK, Oct 21 (IFR) - Valeant bonds dropped as much as 12 points on Wednesday after an explosive report from a short-seller accused the company of fraudulently inflating its revenue numbers.

Valeant blasted the "erroneous" report but investors were already racing for the exits, sending its 7.5% 2021s down 12 points to a cash price of 90.5, according to MarketAxess.

Other bonds from the Canadian pharma company were down between 4 and 10 points on the report from short-selling firm Citron Research.

The report also hit other bonds across the pharma sector. Endo International, for example, saw its paper down 4-5 points.

Citron alleged that Valeant used specialty pharmacies to create "phantom sales" of its products or push more product through distribution channels than sales would warrant.

"Everybody is going to question how good the numbers really were," said Darren Hughes, a high-yield portfolio manager at Invesco, who owns Valeant bonds.

"But until we get more information from the company, it is going to be hard to make a judgment call."

Valeant raised US$10.1bn-equivalent in the European and US high-yield bond markets in March to finance its acquisition of Salix, one of the largest junk-rated bond issues ever. (Reporting by Davide Scigliuzzo; Editing by Marc Carnegie)