LPC: Valeant lenders agree to loan amendment to loosen covenants

Thu Aug 18, 2016 9:17am EDT
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By Kristen Haunss

NEW YORK Aug 18 (Reuters) - Valeant Pharmaceuticals International lenders agreed to an amendment to loosen the company's covenants on its $31 billion of debt, according to a news release Thursday.

Investors in Valeant's loans agreed to the changes in exchange for a higher interest rate and a fee. The company obtained another amendment earlier this year to help stave off default, allowing it additional time to file its financial statements.

Lenders agreed to loosen the company's interest coverage covenant, a requirement that it meet a set ratio of Ebitda compared to interest expenses, according to the release. The amendment cut the ratio to 2.0 times. It was set at 2.75 times through March 31, 2017 and then would step up to 3.0 times, according to an August 9 regulatory filing.

Valeant was also given additional flexibility to sell assets, according to the release. The company's credit agreement had previously allowed it to sell up to 4% of its total assets per year.

The company said it repaid $1.29 billion of debt in 2016, according to an August 9 earnings presentation. It said it expects free cash flow and non-core asset sales to cut debt by more than $5 billion over 18 months.

In addition, the amendment will allow Valeant to issue secured notes with shorter maturities to repay term loans and permit the incurrence of other debt to repay term loans, according to the release.

The company is in compliance with its covenants, Joe Papa, Valeant's chief executive officer, said during an August 9 earnings call.

In return for the amendment, Valeant said it will increase the interest rate it pays lenders by 50bp, according to the news release. It will also pay a 25bp amendment fee. [ID: nL3N1AR157]   Continued...