Item 1.01. Entry
into a Material Definitive Agreement.
Senior Secured Notes Offering
On March 21, 2017, Valeant Pharmaceuticals International, Inc.
(the “Company”) completed its previously announced offering (the “notes offering”) of $1.25 billion aggregate
principal amount of its 6.50% senior secured notes due 2022 (the “2022 notes”) and $2.0 billion aggregate principal
amount of 7.00% senior secured notes due 2024 (the “2024 notes” and together with the 2022 notes, the “notes”).
The notes were offered in the United States and sold to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and
outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. The notes have not been and will
not be registered under the Securities Act or any state securities law and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements.
The net proceeds of the notes offering, together with the proceeds
from a new series F-3 tranche B term loan (detailed below) in connection with the Company’s previously announced refinancing
and amendment of its existing credit agreement (the “Credit Agreement”) and cash on hand, were used to repay certain
loans outstanding under the Company’s credit facilities and to repurchase up to $1.1 billion principal amount of the
Company’s outstanding 6.75% Senior Notes due 2018 (the “2018 Notes”) and to pay related fees and expenses.
The Senior Secured Notes Indenture
The notes were issued pursuant to the indenture, dated as of
March 21, 2017 (the “notes indenture”), between the Company, the guarantors named therein, The Bank of New York Mellon,
as trustee and the notes collateral agents party thereto.
Interest and Maturity
Pursuant to the notes indenture, the 6.50% senior secured notes
will mature on March 15, 2022 and the 7.00% senior secured notes will mature on March 15, 2024. Interest on the notes will be payable
semi-annually in arrears on each March 15 and September 15. Interest on the notes will accrue from and including March 21, 2017
or else the most recent interest payment date to which interest had been paid or duly provided for to but excluding the date on
which such interest is paid.
Guarantees and Collateral
The notes will initially be guaranteed by each of the Company’s
subsidiaries that is a guarantor under the Credit Agreement and under the Company’s existing senior unsecured notes (the
“Existing Senior Notes”) (together, the “Note Guarantors”). The notes and the guarantees will be senior
obligations and will be secured, subject to permitted liens and certain other exceptions, by the same first priority liens that
secure the Company’s obligations under the Credit Agreement.
Ranking
The notes and the guarantees will rank equally in right of payment
with all of the Company’s and the Note Guarantors’ respective existing and future unsubordinated indebtedness and senior
to the Company’s and the Note Guarantors’ respective future subordinated indebtedness. The notes and the guarantees
will be effectively pari passu with the Company’s and the Note Guarantors’ respective existing and future indebtedness
secured by a first priority lien on the collateral securing the notes and effectively senior to the Company’s and the Note
Guarantors’ respective existing and future indebtedness that is unsecured, including the Existing Senior Notes, or that is
secured by junior liens, in each case to the extent of the value of the collateral. In addition, the notes will be structurally
subordinated to (x) all liabilities of any of the Company’s subsidiaries that do not guarantee the notes and (y) any of the
Company’s debt that is secured by assets that are not collateral.
Redemption
The 2022 notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after March 15, 2019, at the redemption prices applicable to the 2022 notes as set forth
in the notes indenture.
The 2024 notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after March 15, 2020, at the redemption prices applicable to the 2024 notes as set forth
in the notes indenture.
In addition, the Company may redeem some or all of the 2022
notes prior to March 15, 2019 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium.
Prior to March 15, 2019, the Company may redeem up to 40% of the aggregate principal amount of the 2022 notes using the proceeds
of certain equity offerings at the redemption price set forth in the notes indenture.
In addition, the Company may redeem some or all of the 2024
notes prior to March 15, 2020 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium.
Prior to March 15, 2020, the Company may redeem up to 40% of the aggregate principal amount of the 2024 notes using the proceeds
of certain equity offerings at the redemption price set forth in the notes indenture.
Upon the occurrence of a change of control (as defined in the
notes indenture), unless the Company has exercised its right to redeem all of the notes of a series as described above, holders
of the notes of such series may require the Company to repurchase such holder’s notes, in whole or in part, at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the purchase date applicable
to such notes.
Certain Covenants
The notes indenture contains covenants that limit the ability
of the Company and any of its restricted subsidiaries (as such term is defined in the notes indenture) to, among other things:
·
incur or guarantee additional indebtedness;
·
make certain investments and other restricted payments;
·
create liens;
·
enter into transactions with affiliates;
·
engage in mergers, consolidations or amalgamations;
and
·
transfer and sell assets.
Events of Default
The notes indenture also provides for customary events of default.
The foregoing summary of the notes indenture is not complete
and is qualified in its entirety by reference to the full and complete text of the notes indenture, a copy of which is attached
as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.
Credit Agreement Amendment
On March 21, 2017, Amendment No. 14 to
the Credit Agreement (the “March 2017 amendment”) became effective.
The March 2017 amendment provided for the
repayment of the Company’s tranche A term loans, series C-2 tranche B term loans, series D-2 tranche B term loans and series
E-1 tranche B term loans. A new series of term loans was established as the series F-3 tranche B term loans, which will be deemed
a single tranche with the Company’s existing series F tranche B term loans, and shall
have terms identical to such series. The initial principal balance of the series F-3 tranche B term loans is approximately $3.06
billion. The Credit Agreement provides for the maturity of all series F tranche B term loans April 1, 2022.
The amortization rate for all series F
tranche B term loans (including the newly established series F-3 tranche B term loans) was increased from 1.00% per annum to 5.00%
per annum. The Company may direct that prepayments be applied to such amortization payments in order of maturity.
Following the consummation of the March
2017 amendment and the notes offering, the outstanding principal balance under the Credit Agreement consists of approximately $6.917
billion of series F tranche B term loans and approximately $525 million of revolving loans.
The March 2017 amendment removed the financial
maintenance covenants with respect to the term loans. The March 2017 amendment also reduced the interest coverage ratio maintenance
covenant under the Credit Agreement to 1.50:1.00 beginning in the fiscal quarter ending March 31, 2017 through the fiscal quarter
ending March 31, 2019, with the interest coverage ratio maintenance covenant increasing to 1.75:1.00 for any quarter ending June
30, 2019 and thereafter. The secured leverage ratio maintenance covenant was increased to 3.00:1.00 beginning in the fiscal quarter
ending March 31, 2017 through the fiscal quarter ending March 31, 2019, with the secured leverage ratio financing covenant decreasing
to 2.75:1.00 for any fiscal quarter ending June 30, 2019 and thereafter. These financial maintenance covenants will apply only
with respect to revolving loans and can be waived or amended without the consent of the term loan lenders under the Credit Agreement.
Certain financial definitions
were also amended, including the definition of “Consolidated Adjusted EBITDA”. Modifications to Consolidated
Adjusted EBITDA included, among other things: (i) modifications to permit the Company to add back extraordinary, unusual
or non-recurring expenses or charges (including certain costs of, and payments of, litigation expenses, actual or
prospective legal settlements, fines, judgments or orders, subject to a cap of $500 million in any twelve month period, of
which no more than $250 million may pertain to any costs, payments, expenses, settlements, fines, judgments or orders, in
each case, arising out of any actual or potential claim, investigation, litigation or other proceeding that the Company did
not publicly disclosed on or prior to the effectiveness of the March 2017 amendment, and subject to other customary
limitations), and (ii) modifications to allow the Company to add back expenses, charges or losses actually reimbursed or for
which the Company reasonably expects to be reimbursed by third parties within 365 days, subject to customary limitations.
The March 2017 amendment also provides
increased flexibility for the Company to, among other things, incur indebtedness and liens, consummate acquisitions and make other
investments, including relaxing certain limitations imposed by prior amendments.
The Company paid each existing series F tranche B term loan
lender and each revolving lender that consented to Amendment No. 14 a fee equal to 0.25% of the aggregate principal amount of outstanding
series F tranche B term loans and revolving commitments, as applicable, held by such lender. The Company paid a fee to each series
F-3 tranche B term loan lender a fee equal to 0.25% of the aggregate principal amount of such series F-3 tranche B term loans funded
on the closing date of the March 2017 amendment.
The foregoing summary of the March 2017 amendment is not complete
and is qualified in its entirety by reference to the full and complete text of the March 2017 amendment, a copy of which is attached
as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated herein by reference.