Moody’s rates Valeant loans Ba3

Moody's Investors Service said it assigned Ba3 ratings to the new senior secured term loan and revolving credit agreement of co-borrowers Valeant Pharmaceuticals International, Inc. and Valeant Pharmaceuticals International.

There are no changes to Valeant's other ratings, including the B3 corporate family rating, B3-PD probability of default rating, Ba3 senior secured rating, Caa1 senior unsecured rating and SGL-2 speculative grade liquidity rating.

The outlook remains stable.

Term loan proceeds are expected to be used to repay existing term loans and senior notes in a leverage-neutral refinancing. The transaction is credit positive because it will extend Valeant's debt maturities and modestly reduce total interest costs, the agency said.

Moody’s said B3 corporate family rating reflects Valeant's very high financial leverage with gross debt/EBITDA of about 7.5 times, and significant challenges in improving organic growth.

Valeant also faces considerable uncertainty related to unresolved legal matters.

Patent expirations over the next 12 to 18 months will erode earnings, causing debt/EBITDA to approach 8 times by late 2018. However, Moody’s said patent expirations will moderate in 2019, resulting in greater stability on an aggregate basis and a reduction in debt/EBITDA below 7.5 times.

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