Large Valeant bondholder calls for a default
Valeant Pharmaceuticals International (VRX) said Tuesday that a large bondholder informed the embattled drugmaker it considers the company's tardy annual report a default, potentially setting off a more serious financial issue for the firm.
The disclosure sent Valeant shares down 3.38% to $30.91 in after-hours trading, extending anew the stock's months-long plunge.
Valeant, a maker of treatments for conditions ranging from acne to dermatitis, said it received a notice of default from investors holding 5.5% debt due in 2023. The holders of the bonds called for default based on Valeant delay in filing its annual report for 2015.
The Wall Street Journal identified the bondholder as Centerbridge Partners, which it reported owns $250 million of bonds due in 2023. Valeant has $30.9 billion in debt outstanding, according to S&P Global Market Intelligence.
The bondholders' move is important because it gives the company 60 days, or until June 11, to file its annual report and clear the claim of default. Valeant said in a statement it "is working diligently and is on schedule to file its 10-K on or before April 29" and added that the claim does not accelerate any of its debt payments.
The drugmaker's recent credit agreement amendment gives it flexibility to submit its financial filings by May 31, before the June 11 deadline under the notes, according to Saish Setty, a senior covenant analyst at Reorg Research. Setty theorized that the noteholders may have acted to protect themselves from any additional filing delays.
Valeant postponed the filing of its annual report to review accounting matters associated with the Philidor Rx Services, a mail-order specialty pharmacy that had distributed the drugmaker's medications to patients.
Valeant cuts ties with “phantom" pharmacy Philidor
Valeant ended the Philidor relationship after an October report by short-seller Andrew Left's Citron Research accused the Canada-based drugmaker of creating a "network of phantom captive pharmacies" to boost sales of Valeant’s more expensive drugs, instead of less-costly alternatives.
Valeant denied the allegation, but named a special board committee to investigate. Preliminary results of the review prompted Valeant to announce plans for restating $58 million in financial earnings from late 2014 into 2015.
Valeant completes Philidor probe without additional fallout
The special committee completed its review without finding any additional financial problems, Valeant said last week.
Shares of the company, which had been a large investment by hedge fund manager Bill Ackman, have lost 85% of their value over the past 12 months.
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