Rodman & Renshaw Pounds Table On Valeant, Still Sees $118 Price After Credit Changes

On March 30, Valeant Pharmaceuticals Intl Inc VRX announced that it had started a process for an amendment and waiver to its existing credit facility.

Rodman & Renshaw’s Raghuram Selvaraju reiterated a Buy rating on the company, with a price target of $118.

Waiver & Amendment

Selvaraju pointed out that the company “still intends to file its Form 10-K for 2015 on or before April 29, 2016.”

Through the waiver, Valeant Pharma seeks to extend the filing of its Form 10-K for 2015 to May 31, 2016 and for filing Form 10-Q for 1Q16 to July 31, 2016.

“These extensions are intended to provide relief under the credit facility in the event that the Form 10-K cannot filed by April 29, 2016 and the Form 10-Q is not filed by June 14, 2016,” the analyst explained.

Also, the proposed waiver would also help waive the cross-default to the company’s indentures, which arose following the failure to file the Form 10-K on March 15, 2016. However, the proposed waiver and amendment needs to be approved by lenders holding over 50 percent of the company’s loans in principal amount.

Additional Cushion

According to the Rodman & Renshaw report, “Valeant is also asking its lenders to amend the interest coverage maintenance covenant and certain financial definitions, which would provide additional cushion in its financial covenants.”

The terms of the proposed amendment would, however, restrict Valeant Pharma’s ability to undertake certain acquisition or make investments, pay dividends and other restricted payments till the financial statements are filed and the company achieves specified leverage ratios.