S&P rates Valeant notes BB-

S&P said it affirmed its B corporate credit rating on Valeant Pharmaceuticals International Inc. The outlook remains stable.

At the same time, the agency affirmed its B- issue-level rating on the company's senior unsecured debt. The 5 recovery rating is unchanged, indicating an expectation for modest (10%-30%; rounded estimate: 20%) recovery in the event of a payment default.

S&P also assigned a BB- issue-level rating and 1 recovery rating to Valeant's proposed $1 billion eight-year senior secured notes. The 1 recovery rating indicates an expectation for very high (90%-100%; rounded estimate: 95%) recovery in the event of a payment default.

The affirmations follow Valeant's announcement that it will issue $1 billion in new eight-year senior secured notes to repay a total of $1 billion in senior unsecured debt from three issues maturing in 2020.

“Although we view the transaction as a modest credit positive, given the longer pro forma maturity profile, we continue to expect leverage to exceed 7x in 2017 and 2018 and the company to generate over $500 million in discretionary cash flow annually,” S&P said in a news release.

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