Shares of Valeant Pharmaceuticals (TSX: VRX) took a very good turn for the better last week. The company reported strong demand for its debt offering, a positive signal that more than erases any fears of a bankruptcy any time soon for the turnaround generics drug supplier.
On Dec. 4, Valeant launched a $1-billion offering for unsecured notes due in 2025. It will use the proceeds to pay off upcoming debt due in 2020, just two years away. The 2025 notes issuance will pay an interest rate of 9.00 percent.
The $1.5 billion in debt it is retiring had paid interest rate at between 5.375% and 7%
The debt markets easily absorbed the offering, letting Valeant upsize the issuance from $1 billion to $1.5 billion on December 5. The response is symbolic of the market’s confidence the company will turn the business around. By removing upcoming maturing debt, Valeant now has five more years to restructure its business such that the cash flow more than pays for the interest payments.
Valeant is moving in the right direction. Similar to Teva Pharmaceuticals (NYSE: TEVA), the stock is still inexpensive despite touching new yearly highs.
