Valeant has already said its tardy filings with the Securities & Exchange Commission could put it in jeopardy of defaulting on its debt. Now, it’s asking its creditors for more time–and more leeway.
Wednesday, the Canadian drugmaker said it proposes to push its 10-K filing deadline to May 31 and its first-quarter 10-Q deadline to July 31. While it’s still working to finish up the 10-K by April 29, the extensions would keep it out of trouble with creditors if it misses that date. Likewise on its June 14 target for the 10-Q.
Valeant’s ($VRX) proposal would also get it off the hook for missing an earlier, March due date for the 10-K, it said.
But time isn’t all the Quebec-based pharma needs. It’s also asking its lenders for amendments and waivers to give it wiggle room. For instance, Valeant wants to ease the interest on its loans, which would “provide additional cushion” for its finances.
In return, Valeant would ratchet back acquisitions and dividend payments until all its filings are in place and the company hits its target leverage ratio. In the meantime, it would put “substantially all net asset sale proceeds” toward paying its loans.
Valeant first acknowledged that it was running into filing trouble earlier this month on a conference call with investors, who didn’t take kindly to the news. A $58 million set of accounting missteps related to a now-nixed specialty pharmacy relationship–which a short seller in October accused Valeant of using to inflate its top line–are behind the hold-up.
Since then, outgoing CEO J. Michael Pearson has pledged to meet with creditors to work something out. But rumors have also circulated that some of those creditors would put Valeant’s back to the wall, leveraging their position to raise the cost of the embattled pharma’s debt.
For its latest proposal to succeed, the company will need a stamp of approval from lenders holding more than 50% of the principal on its loans. In the meantime, it’s struggling on several other fronts; most recently, Pearson received a subpoena from Congress to answer for the company’s hefty price increases on a pair of heart meds it purchased from Marathon last summer.
March 30, 2016 | By Carly Helfand