TEXT-S&P assigns Valeant term loan 'BBB-' rating

Fri Sep 7, 2012 4:40pm EDT

Sept 7 - Standard & Poor's Ratings Services said today that it assigned its
'BBB-' issue-level rating and '1' recovery rating to Montreal-based
pharmaceutical company Valeant Pharmaceuticals International Inc.'s 
proposed $1 billion term loan B due 2019. The '1' recovery rating reflects our
expectation of very high (90%-100%) recovery in the event of payment default. 

At the same time, we assigned our 'BB-' issue-level rating and '5' recovery 
rating to wholly owned subsidiary Valeant Pharmaceuticals International's 
proposed $2.25 billion of senior unsecured notes due 2020-2022. The '5' 
recovery rating reflects our expectation of modest (10%-30%) recovery in the 
event of payment default. 

All other ratings, including the 'BB' corporate credit rating, remain 
unchanged. The company will use proceeds from the term loan and unsecured note 
issuances to fund the $2.6 billion acquisition of Medicis Pharmaceutical Corp. 
(unrated). The remaining proceeds will be used to fund smaller tuck-in 
acquisitions and product rights purchases.

The rating reflects our belief that Valeant remains committed to a 
"significant" financial risk profile. The rating affirmation on Sept. 5, 2012 
was based on a modest increase in adjusted pro forma leverage, which we 
calculate at approximately 4.5x. We believe the company will use its strong 
cash flows to reduce leverage to less than 4x within one year, in line with 
their stated financial policy of keeping leverage at 4x or less (per the 
credit agreement calculation). At this time, we view the acquisition as 
neutral to our view that Valeant has a "fair" business risk profile. Our 
consideration of Valeant's business risk profile as fair reflects the benefits 
of a broader product portfolio, geographic diversification, and expanded 
pipeline it has achieved through multiple acquisitions over the past two 
years. While the acquisition of Medicis makes Valeant the largest U.S. 
dermatology company (pro forma on the basis of reported gross sales), it is 
also the second-largest acquisition in Valeant's history. We believe the 
benefits of the acquisition are offset by the potential for integration issues 
with Medicis and the potential challenges of managing a very large portfolio 
of small products given the high acquisition activity. In our opinion, the 
high level of acquisition activity increases the possibility that integration 
issues could jeopardize our base-case scenario.


RELATED CRITERIA AND RESEARCH
     -- Methodology And Assumptions: Liquidity Descriptors For Global 
Corporate Issuers, Sept. 28, 2011
     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
     -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

RATINGS LIST

Valeant Pharmaceuticals International Inc.
 Corporate Credit Rating               BB/Stable/--

New Ratings

Valeant Pharmaceuticals International Inc.
 $1 bil term loan B due 2019           BBB-
   Recovery Rating                     1

Valeant Pharmaceuticals International
 Senior Unsecured
  $2.25 bil nts due 2020-2022          BB-
   Recovery Rating                     5



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.