Three days ago, the latest catalyst to weigh down Valeant stock was news that the company’s lenders were pushing back on its demands to obtain a default waiver and to loosen restrictions on its negative debt covenants. It appears, however, that that issue has been resolved, and as the company reported moments ago in a press release on its website, VEX “has obtained the requisite lender approval for the amendment and waiver to its credit facility. The Company expects to close the amendment and waiver next week.“
According to the agreement, the deadline for filing the Valeant 10-K will be extended to May 31, 2016 and the deadline for filing its Form 10-Q for the quarter ended March 31, 2016 will be extended to July 31, 2016.
More importantly, in addition to these waivers, the amendment will also modify, among other things, the interest coverage maintenance covenant and certain financial definitions which provides additional cushion in its financial covenants.
What’s the trade off? Well, the rollup and the piggybank are gone: the company agrees to “restrict its ability to make certain acquisitions and other investments and to pay dividends and other restricted payments” until the financial statements are filed and the Company achieves certain leverage ratios.
And most importantly, “while these restrictions are in place, the Company will also be required to apply substantially all net asset sale proceeds to prepay its term loans.”
In other words, any asset proceeds will be used only to repay the bank debt.
For now, the stock likes the news and was up 6% in pre market trading.
Full press release:
Intends to File 10-K on or before April 29, 2016, as Previously Disclosed
Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) announced today that it has obtained the requisite lender approval for the amendment and waiver to its credit facility. The Company expects to close the amendment and waiver next week.
Pursuant to the approved waiver, the deadline for filing the Company’s Form 10-K will be extended to May 31, 2016 and the deadline for filing its Form 10-Q for the quarter ended March 31, 2016 will be extended to July 31, 2016. While the Company is working diligently to file its Form 10-K and Form 10-Q, these extensions provide relief under the credit facility in the event the Form 10-K is not filed by April 29, 2016 and the Form 10-Q is not filed by June 14, 2016. In addition to the extensions, the approved waiver also waives the cross-default to Valeant’s indentures that arose when the Form 10-K was not filed on March 15, 2016. The waiver and amendment were approved by lenders holding more than 50% of the Company’s loans in principal amount.
In addition to these waivers, the amendment will also modify, among other things, the interest coverage maintenance covenant and certain financial definitions which provides additional cushion in its financial covenants. The terms of the amendment will restrict the Company’s ability to make certain acquisitions and other investments and to pay dividends and other restricted payments until the financial statements are filed and the Company achieves certain leverage ratios. While these restrictions are in place, the Company will also be required to apply substantially all net asset sale proceeds to prepay its term loans.
“We are pleased to have the support of our lenders and appreciate their confidence in the Company’s ability to execute our strategic plan,” said Linda LaGorga, SVP and Valeant Treasurer.
The Company is comfortable with its current liquidity position and cash flow generation for the rest of the year, and remains well positioned to meet its obligations.
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