Valeant Bond Investor Seeks Default

A large holder of Valeant Pharmaceuticals International Inc.'s bonds has called a default as a result of the Canadian drugmaker's failure to file its annual report on time.

The notice is from private-equity firm Centerbridge Partners LP, according to people familiar with the matter. Valeant confirmed the request but didn't identify the debt holder.

The move starts a 60-day window, through June 11, during which the embattled company would have to file its annual report or potentially be forced to repay the bonds early. That could trigger default notices in other pieces of Valeant's roughly $30 billion in debt, analysts have said, and become a major additional headache.

Valeant reiterated on Tuesday that it is on track to file the annual report, which was due earlier this year, by April 29. That would enable it to avoid a default.

Valeant shares declined 2.5% in after-hours trading on investor's call for a bond default, which was first reported by The Wall Street Journal. The stock finished up 63 cents at $31.98 in 4 p.m. trading on Tuesday.

New York-based Centerbridge owns about $250 million face value of Valeant's $1 billion bond issue due 2023, some of the people said. The notes have an annual coupon of 5.5%.

Holders of 25% of any single issuance of Valeant bonds can declare a default under certain circumstances, such as when financial statements aren't filed on time.

Creditors often threaten to call a default to win concessions in negotiations with borrowers, rather than to force repayment. Holders of Valeant loans already secured a fee from the company in exchange for later filing deadlines and looser financial conditions.

William Ackman, a Valeant board member and one of the company's biggest shareholders, spoke with Centerbridge executives this weekend to discuss the matter, some of the people said.

The move by Centerbridge shows how various stakeholders are jockeying for position amid turmoil at the company. The shares have lost 88% of their value from an August high as a result of a backlash against its pricing of drugs, a reduced outlook and a financial restatement that delayed the annual report. The company is in the process of replacing its chief executive, Michael Pearson.

Centerbridge manages about $25 billion. It was founded in 2005 by Jeff Aronson, a former distressed-debt investor at Angelo, Gordon & Co., and Mark Gallogly, who once headed the private-equity business at Blackstone Group LP. It manages private-equity and credit assets on behalf of pensions and other institutions.

Write to Liz Hoffman at [e-mail] and Matt Jarzemsky at [e-mail]

(END) Dow Jones Newswires

April 12, 2016 18:15 ET (22:15 GMT)

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