LPC: Valeant hikes premium to lenders to avert default

Tue Apr 5, 2016 3:03pm EDT
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By Kristen Haunss

NEW YORK, April 5 (Reuters) - Valeant Pharmaceuticals International is offering to pay lenders a higher interest rate than initially proposed after some investors threatened to block an amendment the company was seeking to stave off a default on its more than $30 billion of debt, sources said.

The company will now pay lenders an extra percentage point of interest, with the rate changing based on its debt compared to earnings before interest, taxes, depreciation and amortization (Ebitda), or leverage.

Before lenders pushed back, Valeant had offered to pay an interest premium of half a percentage point, stepping down to the original rate when the company satisfied its reporting requirements, and its leverage fell below 5.25 times.

Under the new proposal, an investor that owns the revolver, the term loan A-3 and the term loan A-4 will now be paid 325 basis points more than Libor if leverage is equal to or more than 1.75 times, sources said.

Lenders to the term loan C-2 will be paid 400 basis points when leverage is at least 1.75 times, sources said. Lenders to the term loan D-2 will be paid 375 basis points when leverage is at that level. Lenders to the E-1 term loan will be paid 400 basis points, and F term loan lenders will be paid 425 basis points when interest reaches or tops that level, 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.

The rates are locked in for a year, thereafter subject to leverage levels.   Continued...