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LONG-TERM DEBT
6 Months Ended
Jun. 30, 2013
Debt Disclosure [Abstract]  
LONG-TERM DEBT
LONG-TERM DEBT
A summary of the Company’s consolidated long-term debt as of June 30, 2013 and December 31, 2012, respectively, is outlined in the table below:
 
 
Maturity
Date
 
As of
June 30,
2013
 
As of
December 31,
2012
New Revolving Credit Facility(1)
 
April 2016
 
$
225,000

 
$

New Term Loan A Facility(1)
 
April 2016
 
1,876,228

 
2,083,462

New Term Loan B Facility(1)(2)
 
February 2019
 
1,263,793

 
1,275,167

New Incremental Term Loan B Facility(1)(2)
 
December 2019
 
972,272

 
973,988

Senior Notes:
 
 
 
 
 
 
6.50%
 
July 2016
 
915,500

 
915,500

6.75%
 
October 2017
 
498,484

 
498,305

6.875%
 
December 2018
 
939,727

 
939,277

7.00%
 
October 2020
 
686,876

 
686,660

6.75%
 
August 2021
 
650,000

 
650,000

7.25%
 
July 2022
 
541,789

 
541,335

6.375%(3)
 
October 2020
 
2,216,993

 
1,724,520

6.375%(3)
 
October 2020
 
2,318

 
492,720

Convertible Notes:
 
 
 
 
 
 
1.375% Convertible Notes(4)
 
June 2017
 
209

 
228,576

2.50% Convertible Notes(4)
 
June 2032
 

 
5,133

1.50% Convertible Notes(4)
 
June 2033
 

 
84

Other
 
 
 
4,916

 
898

 
 
 
 
10,794,105

 
11,015,625

Less current portion
 
 
 
(346,875
)
 
(480,182
)
Total long-term debt
 
 
 
$
10,447,230

 
$
10,535,443

____________________________________
(1)
Together, the “Senior Secured Credit Facilities” under the Company’s Third Amended and Restated Credit and Guaranty Agreement (the “Credit Agreement”).
(2)
On February 21, 2013, the Company and certain of its subsidiaries, as guarantors, entered into an amendment to the Credit Agreement to effectuate a repricing of its existing senior secured term loan B facility (the “Term Loan B Facility”) and its existing incremental term B loans (the “Incremental Term Loan B Facility”) by the issuance of $1.3 billion and $1.0 billion in new incremental term loans (the “New Term Loan B Facility” and the “New Incremental Term Loan B Facility”, respectively, and together, the “Repriced Term Loan B Facilities”).
(3)
On March 29, 2013, the Company announced that its wholly-owned subsidiary, Valeant, commenced an offer to exchange (the “Exchange Offer”) any and all of its outstanding $500.0 million aggregate principal amount of 6.375% senior notes due 2020 (the “Existing Notes”) into the previously outstanding $1.75 billion 6.375% senior notes due 2020. Valeant conducted the Exchange Offer in order to satisfy its obligations under the indenture governing the Existing Notes with the anticipated result being that some or all of such notes would be part of a single series of 6.375% senior notes under one indenture. The Exchange Offer, which did not result in any changes to existing terms or to the total amount of the Company’s debt outstanding, expired on April 26, 2013. $497.7 million of aggregate principal amount of the Existing Notes was exchanged as of such date.
(4)
Represents obligations assumed from Medicis.
The total fair value of the Company’s long-term debt, including current portion, with carrying values of $10.8 billion and $11.0 billion at June 30, 2013 and December 31, 2012, was $11.0 billion and $11.7 billion, respectively. The fair value of the Company’s long-term debt is estimated using the quoted market prices for the Company’s debt issuances.
Senior Secured Credit Facilities
On January 24, 2013, the Company and certain of its subsidiaries as guarantors entered into Amendment No. 3 to the Credit Agreement to reprice its senior secured term loan A facility (the “Term Loan A Facility”, as so amended, the “New Term Loan A Facility”) and its revolving credit facility (the “Revolving Credit Facility”, as so amended, the “New Revolving Credit Facility”). As amended, the applicable margins for the New Term Loan A Facility and the New Revolving Credit Facility each were reduced by 0.75%. Interest rates for the New Revolving Credit Facility and the New Term Loan A Facility are subject to increase or decrease quarterly based on leverage ratios. For the quarter ended June 30, 2013, the effective rate of interest on the Company’s borrowings under both the New Revolving Credit Facility and the New Term Loan A Facility was 2.45% per annum.
On February 21, 2013, the Company and certain of its subsidiaries as guarantors entered into Amendment No. 4 to the Credit Agreement to effectuate a repricing of the Term Loan B Facility and the Incremental Term Loan B Facility (the “Term Loan B Repricing Transaction”) by the issuance of the Repriced Term Loan B Facilities. Term loans under the Term Loan B Facility and the Incremental Term Loan B Facility were either exchanged for, or repaid with the proceeds of the Repriced Term Loan B Facilities. The applicable margins for borrowings under the Repriced Term Loan B Facilities are 1.75% with respect to base rate borrowings and 2.75% with respect to LIBO rate borrowings, subject to a 0.75% LIBO rate floor and a 1.75% base rate floor. The term loans under the New Term Loan B Facility and the New Incremental Term Loan B Facility mature on February 13, 2019 and December 11, 2019, respectively, began amortizing quarterly on March 31, 2013 at an annual rate of 1.0% and have terms consistent with the previous Term Loan B Facility and the Incremental Term Loan B Facility, respectively. In connection with the refinancing of the Term Loan B Facility and the Incremental Term Loan B Facility pursuant to the Term Loan B Repricing Transaction, the Company paid a prepayment premium of approximately $23.0 million, equal to 1.0% of the refinanced term loans under the Term Loan B Facility and Incremental Term Loan B Facility. In addition, repayments of outstanding loans under the Repriced Term Loan B Facilities in connection with certain refinancings on or prior to August 21, 2013 require a prepayment premium of 1.0% of such loans prepaid. In connection with the Term Loan B Repricing Transaction, the Company recognized a loss on extinguishment of debt of $21.4 million in the three-month period ended March 31, 2013. For the quarter ended June 30, 2013, the effective rate of interest on the Company’s borrowings under both the New Term Loan B Facility and the New Incremental Term Loan B Facility was 3.5% per annum.
On June 6, 2013, the Company and certain of its subsidiaries, as guarantors, entered into Amendment No. 5 to the Credit Agreement to implement certain revisions in connection with the B&L Acquisition. The amendment provides for certain revisions in connection with, among other things, the formation of VPII Escrow Corp., the offering of the senior unsecured notes by VPII Escrow Corp., the equity offering, the waiver of certain closing conditions and/or requirements in connection with the incurrence of incremental term loans and/or establishment of incremental revolving commitments related to the B&L Acquisition and the consummation of the B&L Acquisition.
On June 26, 2013, the Company and certain of its subsidiaries, as guarantors, entered into Amendment No. 6 to the Credit Agreement to, among other things, allow for the increase in commitments under the New Revolving Credit Facility and the extension of the maturity of the New Revolving Credit Facility to April 2018, and to amend certain other provisions of the Credit Agreement. On July 15, 2013, the increase in commitments and maturity extension under the New Revolving Credit Facility was completed, with commitments increased by $550.0 million to $1.0 billion.
1.375% Convertible Notes, 2.50% Convertible Notes and 1.50% Convertible Notes
In connection with the acquisition of Medicis, the Company assumed Medicis’ outstanding long-term debt, including current portion, of approximately $778.0 million at the Medicis acquisition date. As described in note 3, the Medicis long-term debt, including current portion, is comprised of the following: (i) 1.375% convertible senior notes due June 1, 2017 (the “1.375% Convertible Notes”), (ii) 2.50% contingent convertible senior notes due June 4, 2032 (the “2.50% Convertible Notes”) and (iii) 1.50% contingent convertible senior notes due June 4, 2033 (the “1.50% Convertible Notes”).
On February 11, 2013, all of the outstanding 2.50% Convertible Notes and 1.50% Convertible Notes were converted by holders and settled 100% in cash in the aggregate amount of $5.1 million and $0.1 million, respectively. In addition, during the six-month period ended June 30, 2013, $228.4 million principal amount of the 1.375% Convertible Notes were converted by holders and settled 100% in cash.
Commitment Letter
In connection with the B&L Acquisition, the Company and its subsidiary, Valeant, entered into a commitment letter dated as of May 24, 2013 (as amended and restated as of June 4, 2013, the “Commitment Letter”), with Goldman Sachs Lending Partners LLC, Goldman Sachs Bank USA and other financial institutions to provide up to $9.275 billion of unsecured bridge loans. In connection with the effectiveness of Amendment No. 5, $4.3 billion of the commitments under the Commitment Letter were reallocated from unsecured bridge loans to a commitment in respect of incremental term loans under the Company’s Senior Secured Credit Facilities and were not subject to a commitment fee. Subsequently, the Company obtained $9.575 billion in financing through a syndication of incremental term loan facilities under the Company’s existing Senior Secured Credit Facilities of $4.05 billion (the “Incremental Term Loan Facilities”), the issuance of the 6.75% senior notes due 2018 (the “2018 Senior Notes”) in an aggregate principal amount of $1.6 billion, the issuance of the 7.50% senior notes due 2021 (the “2021 Senior Notes”) in an aggregate principal amount of $1.625 billion, and the issuance of new equity of approximately $2.3 billion. See note 14 titled “SHAREHOLDERS’ EQUITY” and note 20 titled “SUBSEQUENT EVENTS AND PENDING TRANSACTIONS” for additional information. The proceeds from the issuance of the Incremental Term Loan Facilities, the 2018 Senior Notes, the 2021 Senior Notes and the equity were utilized to fund (i) the transactions contemplated by the Merger Agreement, (ii) B&L’s obligation to repay all outstanding loans under certain of its existing credit facilities, (iii) B&L’s tender offer for or defeasance or irrevocable call for redemption and deposit of cash to effect such defeasance or redemption of B&L’s 9.875% Senior Notes due 2015 and (iv) certain transaction expenses. In connection with the Commitment Letter, the Company incurred approximately $37.3 million in fees, which are recognized as deferred financing costs. In the second quarter of 2013, the Company expensed $24.2 million of deferred financing costs associated with the Commitment Letter to Interest expense in the consolidated statements of income (loss). The remaining $13.1 million of deferred financing costs was expensed in the third quarter of 2013 upon closing of the 2018 Senior Notes and 2021 Senior Notes on July 12, 2013.