Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has received creditors’ approval to extend its annual report filing deadline into May though in the process it has to show some concession on its debt terms. The company has been on the verge of default with some big investors like Centerbridge issuing a notice of default. The call to default has resulted from the company’s failure to file its annual report earlier this year adding to the number of concerns it is currently facing.
The company had earlier on in the week released a notice that it was on schedule to file the report by April 29 which was necessary to avoid a default. The notice signifies how Valeant holders are jockeying for position amidst the turmoil the company faces. To regain investors’ confidence, Valeant has brought in new board members and, is in the process of replacing the Chief Executive Michael Pearson.
Valeant debt is split between about $19 billion in bonds and $12 billion in bank loans. The company has stressed that it is still in a position of meeting its obligation. Centerbridge owns about $250 million of the $1 billion face value of Valeant’s bond issued due on 2023. Under the company’s debt agreements, holders of 25% of any single issued bond under certain circumstance can call for default.
Among new provisions agreed by creditors after accepting to extend the filing deadline, include a $250 million cap on new acquisitions up to when Valeant gets its leverage ratio down to 1.0 from 4.5. The company also agreed to use proceeds of any asset sale to paying off the debt.
Valeant bonds in question fell to 76 cents on the dollar in mid-March though they have rebounded to recently trading at 82 cents according to data from MarketAxess. The company’s shares are close to 88% down from the August high. Reasons for the share drops are delays in the annual report, a reduced earnings outlook, and a backlash against its pricing of drugs. The company’s shares declined by 3.6% to $31.98, hours after they had gained 63 cents on Tuesday.