Dive Brief:
- Valeant Pharmaceuticals on Tuesday said it had received a notice of default from one of its bondholders tied to the continued delay in filing its annual report. The company now has 60 days to submit the report before creditors can demand immediate repayment.
- Private equity firm Centerbridge Partners reportedly sent the notice to Valeant, according to the Wall Street Journal. The firm holds more than 25% of Valeant's 5.5% bonds.
- In a statement, Valeant reiterated it would file its Form 10-K on or before April 29, which would be well before any default-related payments are triggered.
Dive Insight:
The ramifications of failing to file on time continue to mount for Valeant. Last week, the drugmaker negotiated a one-month deadline extension with its lenders under a separate credit facility. In order to win the reprieve, Valeant was forced to increase the interest rate it pays on its loans by 1% until it delivers its Q2 financial statements. Additionally, the company paid lenders who agreed to the new terms a fee equal to 0.5% of the value of its outstanding loans with each lender.
Now, one of its bondholders has come calling too. If Valeant can live up to its April 29 filing promise, the notice shouldn't result in an actual default. The company has a 60-day grace period in order to "cure" default.
Furthermore, "The notice of default does not result in the acceleration of any of the company's indebtedness," Valeant said. But, the notice is an additional headache and could lead Valeant to offer concessions as it did to holders of its loans.
Renewed pressure from Congress
Valeant missed the original deadline to file the report because on an internal investigation into accounting practices tied to its relationship with the specialty pharmacy Philidor. An initial disclosure in February had revealed $58 million in revenue which was improperly recognized. Last week, the company announced the investigatory committee had found no further errors in previously released financial statements.
The review's conclusion clears the way for Valeant to file its reports. But Representative Elijah Cummings (D-MD), ranking member of the House Oversight Committee, wants more information on what the investigation found.
In a letter (see below) sent Tuesday, Cummings demanded copies of "all documents memorializing or communicating the ad hoc committee's findings," and said the company's previous disclosures on its relationship with Philidor had revealed little.
Cummings' letter slams the company for failing to provide transcribed interviews with employees involved in running Philidor operations, which he has requested twice before. "Your refusal to cooperate fully with Congress is extremely troubling and reflects a pattern of obstruction that impairs our ability to protect the American people against your company's exorbitant prices increases," Cummings said.
However, Valeant quickly pushed back on Cummings' claims, saying it "has cooperated with the full committee's review from the beginning, including providing over 78,000 pages of documents, testifying before the committee on February 4th, and working with the committee to accommodate all of its requests."
Separately, CEO Michael Pearson is scheduled to testify in front of the Senate Special Committee on Aging on April 27. Congressional pressure from both the House and the Senate looks unlikely to ebb anytime soon as drug pricing issues remain in the national spotlight.
Letter from Rep. Elijah Cummings to Valeant CEO Michael Pearson