Valeant's lenders loosen up, but T. Rowe throws another lawsuit on the pile

Valeant

Good news for Valeant investors worried about the drugmaker defaulting on its mountain of debt: Its creditors are giving it some breathing room.

Thursday, the embattled drugmaker announced that its lenders had approved tweaks to its credit agreements that’ll give it space to maneuver as works to dig itself out of the $31 billion hole it’s in after years of serial dealmaking.

"We are pleased to have the support of our lenders and appreciate their confidence in the company's future," CEO Joseph Papa said in a statement, noting that the amendment “provides us with additional flexibility and allows us to focus on executing our strategic plan, developing our pipeline and improving patients' lives."

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And Valeant can use that flexibility as it works toward selling off pieces of its business to raise cash. In its Q2 earnings presentation earlier this month, it predicted that noncore asset sales could generate about $8 billion. Valeant has already “engaged multiple banks and advisors in this process to explore our options,” it said, and Papa told shareholders the company has already fielded some unsolicited bids.

Valeant is hardly out of the woods, though. It’s still grappling with a host of other issues that have put its stock price in the doldrums--including a criminal investigation into claims that the company defrauded insurers by hiding its close ties to now-dismantled specialty pharmacy Philidor.

And earlier this week, mutual fund behemoth T. Rowe Price Group piled on the pain, suing Valeant on claims that its investors had lost billions of dollars on account of its “fraudulent scheme.”

Valeant "hid from investors the company’s clandestine network of controlled pharmacies and other deceptive practices that were true drivers of Valeant’s purported growth and which exposed the company to massive risks," T. Rowe and Alleghany Corp. alleged in the suit.

Valeant, for its part, said Thursday that it had not yet been served and that the lawsuit repeats allegations from a class action brought by TIAA-CREF. “As with the original complaint, which was filed in October 2015, Valeant intends to defend itself and cannot comment further on ongoing litigation,” it said in a statement.

But as outspoken Valeant critic and Wells Fargo analyst David Maris wrote in a note to clients, Valeant’s tally of legal proceedings already exceeds 20--and Papa hasn’t yet tagged any funds for potential fines or litigation judgments that Maris thinks could reach $2 billion.

“We find the growing list of investigations potentially overwhelming for any management team, let alone one that is dealing with a significant business disruption and management turnover,” he said.

- read Valeant's statements here and here
- see the lawsuit (PDF)

Related Articles:
Valeant under criminal investigation over Philidor ties: WSJ
Is Valeant really stabilizing? With Q2 misses, analysts aren't convinced
Valeant files overdue 10-K, makes sweeping board changes in push for turnaround
Valeant investors, shocked by lightweight guidance, aren't buying CEO Pearson's recovery plans
Pressed by reporters, Valeant 'fesses up to SEC investigation
Another snafu for Valeant as internal probe triggers restated earnings
Valeant cuts ties with shadowy pharmacy Philidor
Valeant shares nosedive on short seller's 'phantom sales' allegations

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