Valeant gains more flexibility to sell assets with lenders' approval to amend credit facility

Valeant Pharmaceuticals announced Thursday that it has obtained approval from lenders to amend its credit facility, allowing the company, amongst other things, greater flexibility to sell assets. CEO Joseph C. Papa remarked "the amendment provides us with additional flexibility and allows us to focus on executing our strategic plan."

Specifically, Valeant will be permitted to lower the interest coverage maintenance covenant on earnings to at least two times the cash interest expense, down from a rate of at least 2.75 times as granted in a previous credit facility amendment. In exchange, Valeant agreed to a 0.5-percent hike on its applicable interest rate margins on its credit facility and to pay a 0.25-percent amendment fee on the aggregate principal amount of each consenting lender's outstanding loans and commitments under the credit facility.

The announcement comes after Valeant disclosed reorganisation plans earlier this month that included divestments of non-core assets in an effort to repay debt. Sources later suggested that the drugmaker had offered to increase the interest rates on its loans in exchange for an amendment loosening one of the covenants on its debt agreement.

Earlier this week, analysts at Morgan Stanley upgraded Valeant's stock based on the company's plans to divest assets and amend its loan agreements. The news followed a report indicating that Valeant is under investigation by US authorities concerning its relationship with defunct specialty pharmacy Philidor.

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