Shareholders may have panicked this week over the prospect that Valeant could default on its debt. But the company is telling its employees not to worry.
|Valeant CEO J. Michael Pearson|
Valeant ($VRX) isn't going bankrupt, CEO J. Michael Pearson reassured staff of the Canadian drugmaker in a memo seen by Bloomberg. "This is a matter we are taking very seriously," he wrote. "We are working to extend the deadlines in our loan agreements, and I am confident we will be able to do so."
Valeant's ability to hold up its end of its loan bargains--struck back when the company sought buyout after buyout to fuel growth--came into question earlier this week, when it admitted it wouldn't hit a March 30 cutoff to file its audited annual financial reports. It has $58 million in accounting missteps related to specialty pharmacy Philidor to thank for the delay; those discrepancies triggered an ongoing earnings restatement, the company said last month.
And while Pearson may feel confident about the situation, investors haven't shared the same sentiment. That announcement--along with news that several of the company's businesses were underperforming--sent them fleeing for the doors, with Valeant's share price tanking by more than 50%.
Meanwhile, bagging those extensions may not be so easy. Creditors--who can demand accelerated repayment after March 30--may attempt to negotiate key elements of their pacts with the Quebec-based drugmaker, potentially raising the cost of its debt, Reuters reported Thursday.
Valeant has enough on its plate without a squeeze from its creditors. In addition to the earnings restatement, sales woes and share-price massacre, it's dealing with channel-stuffing allegations, a price-hike controversy, and investigations from bodies including the SEC and Congress.
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