Valeant cuts spread on $4.55 billion term loan B to Libor plus 325 bps

By Sara Rosenberg

New York, March 12 – Valeant Pharmaceuticals International Inc. reduced pricing on its $4.55 billion seven-year senior secured first-lien term loan B to Libor plus 325 basis points from Libor plus 350 bps, according to a market source.

The term loan B has a step-down to Libor plus 300 bps at 1.75 times net senior secured leverage.

Also, the original issue discount on the term loan B was tightened to 99½ from 99, the source said.

The term loan B still has a 0.75% Libor floor, 101 soft call protection for six months, amortization of 1% per annum, and minimum interest coverage and maximum secured leverage covenants.

Included in the B loan is a ticking fee of the spread plus the floor starting 30 days from allocations.

Recommitments were due at 5 p.m. ET on Thursday, compared to an initial commitment deadline of noon ET on Friday, the source added.

In addition to the term loan B, the company is getting a $1 billion incremental five-year term loan A.

Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., the Bank of Tokyo-Mitsubishi UFJ Ltd., DNB Markets Inc., SunTrust Robinson Humphrey Inc., Barclays, Morgan Stanley Senior Funding Inc., RBC Capital Markets and Citigroup Global Markets Inc. are the bookrunners on the $5.55 billion of incremental term loan debt (Ba1/BB).

Proceeds will be used to help fund the acquisition of Salix Pharmaceuticals Ltd. for $158 per share in cash, or a total enterprise value of about $14.5 billion, repay Salix’s existing credit facility, redeem Salix’s 6% senior notes due 2021 and pay any cash consideration necessary upon the conversion of Salix’s 1.5% convertible senior notes due 2019 and 2.75% convertible senior notes due 2015.

Other funds for the transaction will come from $9.6 billion of senior unsecured notes and cash on hand.

Closing is expected in the second quarter, subject to customary conditions and regulatory approval.

Net debt to adjusted pro forma EBITDA will be around 5.6 times, but the company expects leverage to be below 4 times by the second half of 2016.

Valeant is a Laval, Quebec-based specialty pharmaceutical company. Salix is a Raleigh, N.C.-based developer and marketer of prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases.

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