LONG-TERM DEBT

A summary of the Company’s consolidated long-term debt as of September 30, 2013 and December 31, 2012, respectively, is outlined in the table below:



	Maturity Date	As of September 30, 2013			As of December 31, 2012
New Revolving Credit Facility⁽¹⁾	April 2018	$	—		$	—
New Term Loan A Facility⁽¹⁾	April 2016	1,666,535			2,083,462
Tranche A Term Loans⁽¹⁾	April 2016	742,528			—
New Term Loan B Facility⁽¹⁾⁽²⁾	February 2019	1,255,373			1,275,167
New Incremental Term Loan B Facility⁽¹⁾⁽²⁾	December 2019	965,790			973,988
Tranche B Term Loans⁽¹⁾	August 2020	3,087,242			—
Japanese Revolving Credit Facility⁽⁵⁾	July 2014	34,192			—
Senior Notes:
6.50%	July 2016	915,500			915,500
6.75%	October 2017	498,573			498,305
6.875%	December 2018	939,953			939,277
7.00%	October 2020	686,983			686,660
6.75%	August 2021	650,000			650,000
7.25%	July 2022	542,016			541,335
6.375%⁽³⁾	October 2020	2,220,346			1,724,520
6.375%⁽³⁾	October 2020	—			492,720
6.75%	August 2018	1,580,863			—
7.50%	July 2021	1,605,245			—
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⁽⁵⁾	Various	13,366			898
		17,404,714			11,015,625
Less current portion		(360,964		)	(480,182		)
Total long-term debt		$	17,043,750		$	10,535,443

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(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 “Repriced Term Loan B Facility” and the “Repriced Incremental Term Loan B Facility”, respectively, and together, the “Repriced Term Loan B Facilities”). On September 17, 2013, the Company and certain of its subsidiaries, as guarantors, entered into an amendment to the Credit Agreement to effectuate a repricing of the Repriced Term Loan B Facilities by issuance of $1,287.0 million and $990.0 million in new incremental term loans (the “New Term Loan B Facility” and the “New Incremental Term Loan B Facility”, respectively, and together, the “New 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. In the third quarter of 2013, the Company executed a private exchange of the remaining $2.3 million of aggregate principal amount of the Existing Notes into the previously outstanding $1.75 billion 6.375% senior notes due 2020.


(4)	Represents obligations assumed from Medicis.


(5)	Relates primarily to the obligations assumed from B&L (discussed below).

The total fair value of the Company’s long-term debt, including current portion, with carrying values of $17.4 billion and $11.0 billion at September 30, 2013 and December 31, 2012, was $18.3 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 “Amended Revolving Credit Facility”). As amended, the applicable margins for the New Term Loan A Facility and the Amended Revolving Credit Facility each were reduced by 0.75%. Interest rates for the Amended Revolving Credit Facility and the New Term Loan A Facility are subject to increase or decrease quarterly based on leverage ratios. As of September 30, 2013, the effective rate of interest on the Company’s borrowings under the New Term Loan A Facility was 2.43% per annum. During the third quarter of 2013, the Company made two voluntary prepayments of the scheduled December 2013 and March 2014 amortization payments applicable to the New Term Loan A Facility, resulting in a principal reduction of $159.4 million.

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 Repriced Term Loan B Facility and the Repriced 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.

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 provided 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 Amended Revolving Credit Facility and the extension of the maturity of the Amended 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 Amended Revolving Credit Facility was completed, with commitments increased by $550.0 million to $1.0 billion (the “New Revolving Credit Facility”). As of September 30, 2013, the effective rate of interest on the Company’s borrowings under the New Revolving Credit Facility was 2.42% per annum.

On June 27, 2013, the Company priced the incremental term loan facilities in the aggregate principal amount of $4,050.0 million (the “Incremental Term Loan Facilities”) under its existing Senior Secured Credit Facilities. The Incremental Term Loan Facilities consist of (1) $850.0 million of tranche A term loans, maturing on April 20, 2016 (the “Tranche A Term Loans”), bearing interest at a rate per annum equal to, at the election of the Company, (i) the base rate plus 1.25% or (ii) LIBO rate plus 2.25% and having terms that are consistent with the Company’s existing New Term Loan A Facility, and (2) $3,200.0 million of tranche B term loans maturing on August 5, 2020 (the “Tranche B Term Loans”), bearing interest at a rate per annum equal to, at the election of the Company, (i) the base rate plus 2.75%, subject to a 1.75% base rate floor or (ii) LIBO rate plus 3.75%, subject to a 0.75% LIBO rate floor and having terms that are consistent with the Company’s New Term Loan B Facility. The Incremental Term Loan Facilities closed on August 5, 2013, concurrent with the closing of the B&L Acquisition. Pursuant to the Credit Agreement, in connection with the funding of the Incremental Term Loan Facilities, the interest margins under the Repriced Term Loan B Facility and the Repriced Incremental Term Loan B Facility increased by 0.875% per annum. As of September 30, 2013, the effective rate of interest on the Company’s borrowings under the Tranche A Term Loans and the Tranche B Term Loans was 2.47% and 4.5% per annum, respectively. During the third quarter of 2013, the Company made two voluntary prepayments of the scheduled December 2013 and March 2014 amortization payments applicable to the Tranche A Term Loans and the Tranche B Term Loans, resulting in a principal reduction of $63.8 million and $16.0 million, respectively.

On September 17, 2013, the Company and certain of its subsidiaries, as guarantors, entered into Amendment No. 7 to the Credit Agreement to effectuate a repricing of the Repriced Term Loan B Facilities by issuance of the New Term Loan B Facilities. Term loans under the Repriced Term Loan B Facility and the Repriced Incremental Term Loan B Facility were either exchanged for, or repaid with the proceeds of the New Term Loan B Facilities. The applicable margins for borrowings under the New Term Loan B Facilities are 2.0% with respect to base rate borrowings and 3.0% with respect to LIBO rate borrowings, subject to a 1.75% base rate floor and a 0.75% LIBO rate floor. The incremental term loans under the New Term Loan B Facility and the New Incremental Term Loan B Facility have terms consistent with the previous Repriced Term Loan B Facility and the Repriced Incremental Term Loan B Facility. As of September 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 3.83% per annum. During the third quarter of 2013, the Company made two voluntary prepayments of the scheduled December 2013 and March 2014 amortization payments applicable to the New Term Loan B Facility and the New Incremental Term Loan B Facility, resulting in a principal reduction of $6.5 million and $5.0 million, respectively.

2018 Senior Notes and 2021 Senior Notes

On July 12, 2013, VPII Escrow Corp. (the “Issuer”), a newly formed wholly-owned subsidiary of the Company, issued $1,600.0 million aggregate principal amount of the 6.75% senior notes due 2018 (the “2018 Senior Notes”) and $1,625.0 million aggregate principal amount of the 7.50% senior notes due 2021 (the “2021 Senior Notes” and together with the 2018 Senior Notes, the “Notes”) in a private placement. The 2018 Senior Notes mature on August 15, 2018 and bear interest at the rate of 6.75% per annum, payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2014. The 2021 Senior Notes mature on July 15, 2021 and bear interest at the rate of 7.50% per annum, payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2014. In connection with the issuances of the 2018 Senior Notes and the 2021 Senior Notes, the Company incurred approximately $20.0 million and $20.3 million in underwriting fees, respectively, which are recognized as debt issue discount and which resulted in net proceeds of $1,580.0 million and $1,604.7 million, respectively. At the time of the closing of the B&L Acquisition, (1) the Issuer was voluntarily liquidated and all of its obligations were assumed by, and all of its assets were distributed to the Company, (2) the Company assumed all of the Issuer’s obligations under the Notes and the related indenture and (3) the funds previously held in escrow were released to the Company and were used to finance the B&L Acquisition.

The Notes are guaranteed by each of the Company’s subsidiaries that is a guarantor of the Company’s existing Senior Secured Credit Facilities.

The indenture governing the terms of the Notes provides that the 2018 Senior Notes and the 2021 Senior Notes, are redeemable at the option of the Company, in whole or in part, at any time on or after August 15, 2015 and July 15, 2016, respectively, plus accrued and unpaid interest, if any, to the applicable redemption date. In addition, the Company may redeem some or all of the 2018 Senior Notes prior to August 15, 2015 and some or all of the 2021 Senior Notes prior to July 15, 2016, in each case at a price equal to 100% of the principal amount thereof, plus a make-whole premium. Prior to August 15, 2015, the Company may redeem up to 35% of the aggregate principal amount of the 2018 Senior Notes and prior to July 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Senior Notes, in each case using the proceeds of certain equity offerings at the respective redemption price equal to 106.75% and 107.50% of the principal amount of the 2018 Senior Notes and 2021 Senior Notes, respectively, plus accrued and unpaid interest to the applicable date of redemption.

If the Company experiences a change in control, the Company may be required to repurchase the Notes, as applicable, in whole or in part, at a purchase price equal to 101% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest to, but excluding the applicable purchase date of the Notes.

The Notes indenture contains covenants that limit the ability of the Company and certain of its subsidiaries 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.

Japanese Revolving Credit Facility and Debentures

In connection with the B&L Acquisition, the Company assumed B&L’s outstanding long-term debt, including current portion, of approximately $4,209.9 million at the B&L Acquisition date. As described in note 3, subsequent to the acquisition date, the Company settled the majority of the assumed long-term debt. As of September 30, 2013, B&L’s outstanding long-term debt, including current portion, is comprised of the following: (i) Japanese yen-denominated variable-rate backed secured revolving credit facility (the “Japanese Revolving Credit Facility”) and (ii) debentures.

Japanese Revolving Credit Facility

The Japanese Revolving Credit Facility is available in amounts of up to ¥3.36 billion ($34.2 million at September 30, 2013), expiring on July 8, 2014 and bears an interest rate of the Tokyo Interbank Offered Rate plus 0.75% per annum. The Japanese Revolving Credit Facility had an initial term of one year and is renewable annually. Borrowings under the Japanese Revolving Credit Facility are secured by an interest in certain eligible accounts receivable and inventory of subsidiary as defined in the agreement. The terms of the Japanese Revolving Credit Facility contain covenants including requiring the Japanese subsidiary to maintain certain levels of net worth and a maximum inventory turnover ratio.

Debentures

The debentures outstanding as of September 30, 2013 that were assumed by the Company in connection with the B&L Acquisition consist of two tranches: (i) 7.125% senior notes, due August 1, 2028, with outstanding principal amount of $11.7 million and (ii) 6.56% senior notes, due August 12, 2026, with outstanding principal amount of less than $0.1 million.

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 nine-month period ended September 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 the Incremental Term Loan Facilities under the Company’s existing Senior Secured Credit Facilities of $4.05 billion, the issuance of the 2018 Senior Notes in an aggregate principal amount of $1.6 billion, the issuance of 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 15 titled “SHAREHOLDERS’ EQUITY” 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 discharge or irrevocable call for redemption and deposit of cash to effect such discharge 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 were 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 (loss) income. The remaining $13.1 million of deferred financing costs was expensed to Interest expense in the third quarter of 2013 upon closing of the 2018 Senior Notes and 2021 Senior Notes on July 12, 2013.