June 25, 2013 / 8:55 PM / 4 years ago

Valeant sweetens terms on M&A debt financing

NEW YORK, June 25 (IFR) - Pharmaceuticals giant Valeant sweetened the terms on its proposed new loan and high-yield debt financing package, sources said Tuesday, as it looks to fund its USD8.7bn acquisition of Bausch & Lomb in an extremely jittery market.

Valeant also dropped a planned longer-dated note in favor of a shorter maturity tranche, in a nod to investor worries about duration risk at a time when interest rates have been spiking sharply.

The Canadian company was seen out with price guidance of 7.5% area on the eight-year non-call three tranche of the two-part bond offering, market sources said. That has risen steadily from initial whispers of around 6% early last week, as market nerves about the Fed eventually winding down its easy money policy have wreaked havoc on rates.

The B1/B rated senior unsecured notes will now also include 2018 notes, callable after two years, after Valeant scuttled its proposed 10-year non-call five notes.

Price talk on the five-year non-call two notes is currently around 6.75% area yield, the sources said.

The back-up in Treasury rates has quickly prodded the average yield-to-worst on the Barclays high-yield index higher. It hit 6.94% at close on Monday, up 81 basis points from 6.13% last Wednesday.

With the average yield-to-worst on the cusp of 7%, investors are beginning to view the current levels as a buying opportunity.

“Now it’s looking attractive again,” said one high-yield investor.

Price talk on the five-year non-call two notes is currently around 6.75% area yield, the sources said.

Valeant meanwhile increased pricing on the USD500m term loan A and USD3.55bn term loan B.

Price talk on the term loan A is now Libor+225, with an issue price of 98.5. Previously, the term loan A was guided at Libor+225, with an issue price of 99-99.5.

The term loan B is now guided at L+375, with a 75bp Libor floor and a 98.5 issue price. Previously, the term loan B was guided at L+325-350, with a 75bp Libor floor, and a 99.5 issue price.

Investors had speculated that loan pricing could increase, based on where the bonds priced.

Goldman Sachs is lead-left bookrunner on the financing, and is joined by Bank of America Merrill Lynch, Barclays, Morgan Stanley, and RBC as joint bookrunners on the senior unsecured notes, and arrangers on the loan.

The financing package will also include USD1.75bn of equity.

Valeant last month announced its acquisition of contact lens giant Bausch & Lomb, which will retain its name and become a division of its new Canadian owner.

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