April 5, 2016 / 7:07 PM / in 2 years

LPC: Valeant hikes premium to lenders to avert default

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.

A 50 basis points amendment fee on committed loan amounts the company was offering to pay has not changed.

At the end of 2015, Valeant had a $250 million revolving line of credit; a $140.4 million A-1 term loan A; a $137.3 million A-2 term loan A; a $1.88 billion A-3 term loan A; a$951.3 million A-4 term loan A; a $1.09 billion D-2 term loan B; a $835.1 million C-2 term loan B; a $2.53 billion E-1 term loan B; and a $4.06 billion Series F term loan B, according to a March 15 news release. The company also had $19.2 billion of senior notes.

Additional changes to the original proposal include requiring all net asset sale proceeds to be used to repay debt until all financial reporting requirements are met and leverage is equal to or less than 4.5 times from a prior 5.25 times, sources said.

A Barclays spokesperson declined to comment. A Valeant spokesperson did not immediately return a phone call seeking comment. (Reporting by Kristen Haunss; Editing By Michelle Sierra and Lynn Adler)

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