Valeant sweetens terms for proposed M&A bond

Mon Jun 24, 2013 5:21pm EDT

NEW YORK, June 24 (IFR) - Valeant Pharmaceuticals has sweetened the terms on its proposed jumbo high-yield bond, as the pharma giant tries to get a deal done in an extremely unwelcoming issuance climate.

Valeant, having already sounded out investors on the East Coast last week, met with junk bond investors on the West Coast on Monday to pitch the USD3.225bn trade.

The two-tranche transaction is part of a USD9.3bn financing package backing Valeant's USD8.7bn acquisition of Bausch & Lomb, with senior unsecured notes due 2021 and 2023.

According to market sources, the shorter dated tranche - which is expected to gain the most traction - is now being touted around a yield level of 7% from initial talk in the 6% range and then mid to high 6% late last week.

Meanwhile the average yield to worst on the Barclays high-yield index backed up to 6.62% on Friday from 6.13% on Wednesday.

"I think it's going to be tough to get such a big deal under way," said Gershon Distenfeld, director of high-yield debt at Alliance Bernstein.

"When people have to sell to meet redemptions in a very illiquid market, their appetite to buy is not what it is in a normal market."

Goldman Sachs is lead-left bookrunner on the trade, with Barclays, BAML, JPM, MS and RBC as joint books. The two tranches are callable after three and five years respectively.

"My guess is that they will get this deal done but they will have to pay up for it," said Mark McCabe of KDP Investment Advisors, an independent provider of credit research and analysis.

"The acquisition doesn't close until September. They could put the deal on hold and come back in a few weeks when the market could be a little more receptive."

According to Lipper, a Thomson Reuters company, US high-yield bond funds have suffered more than USD9bn of outflows since May 22, when Federal Reserve Chairman Ben Bernanke first publicly discussed slowing down the Fed's easy money policies.

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