SHORT-TERM BORROWINGS AND LONG-TERM DEBT

3 Months Ended

Mar. 31, 2012

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

10.   SHORT-TERM BORROWINGS AND LONG-TERM DEBT

• A summary of the Company's consolidated short-term borrowings and long-term debt as of March 31, 2012 and December 31, 2011 is outlined in the table below:

	Maturity Date	As of March 31 2012			As of December 31 2011
Short-term borrowings
Brazil Uncommitted Line of Credit(a)	August 2012	$	7,364		$	—
Long-term debt
Revolving Credit Facility(b)	April 2016	$	—		$	220,000
Term Loan A Facility(b)	April 2016		2,159,993			2,185,520
Term Loan B Facility(b)	February 2019		590,815			—
Senior Notes:
6.50%	July 2016		915,500			915,500
6.75%	October 2017		498,038			497,949
6.875%	December 2018		938,601			938,376
7.00%	October 2020		686,336			686,228
6.75%	August 2021		650,000			650,000
7.25%	July 2022		540,654			540,427
5.375% Convertible Notes(c)	August 2014		16,138			17,011
			6,996,075			6,651,011
Less current portion			(145,062	)		(111,250	)
Total long-term debt		$	6,851,013		$	6,539,761

(a)

Short-term borrowings under uncommitted line of credit have been included in Accrued liabilities and other current liabilities on the consolidated balance sheets.

(b)

On February 13, 2012, the Company and certain of its subsidiaries amended and restated the credit agreement to provide for a facility of up to $3.1 billion and amend certain other provisions.

(c)

Refer to note 11 — Securities Repurchase Program.

• The total fair value of the Company's long-term debt, with carrying values of approximately $7.0 billion and $6.7 billion at March 31, 2012 and December 31, 2011, was $7.1 billion and $6.7 billion, respectively. The fair value of the Company's long-term debt is estimated using the quoted market prices for the same issues and other pertinent information available to management as of the end of the respective periods.

  Brazil Uncommitted Line of Credit

  On February 29, 2012, the Company's subsidiary in Brazil entered into an uncommitted unsecured line of credit with a financial institution with total availability of R$16.0 million ($8.8 million at March 31, 2012). This uncommitted unsecured line of credit expires on August 27, 2012 and bears an interest rate of the Interbank Deposit Certificate Rate plus 0.23% per month. As of March 31, 2012, the Company had $7.4 million of borrowings under this line of credit, with $1.4 million of remaining availability. The effective interest rate on the drawn borrowings was approximately 1.0% per month.

  Senior Secured Credit Facilities

  On February 13, 2012, the Company and certain of its subsidiaries as guarantors entered into the Third Amended and Restated Credit and Guaranty Agreement (the "Credit Agreement") with a syndicate of financial institutions and investors. The Credit Agreement provides for a $275 million revolving credit facility, including a sublimit for the issuance of standby and commercial letters of credit and a sublimit for swing line loans (the "Revolving Credit Facility"), a $2.225 billion senior secured term loan A facility (the "Term Loan A Facility"), which includes a $500 million delayed draw term loan facility (the "Delayed Draw Facility") and $500 million of incremental term loans (the "Incremental Term Loans"), and a $600 million senior secured tranche B term loan facility (the "Term Loan B Facility" and, together with the Revolving Credit Facility and the Term Loan A Facility, the "Senior Secured Credit Facilities"). The Revolving Credit Facility matures on April 20, 2016 and does not amortize. The Term Loan A Facility matures on April 20, 2016 and began amortizing quarterly on March 31, 2012 at an initial annual rate of 5.0%. The amortization schedule under the Term Loan A Facility will increase to 10.0% annually commencing March 31, 2013 and 20% annually commencing March 31, 2014, payable in quarterly installments. The Term Loan B Facility matures on February 13, 2019 and amortizes quarterly commencing June 30, 2012 at an annual rate of 1.0%.

  As of March 31, 2012, $2,160.0 million in term loans was outstanding under the Term Loan A Facility, $590.8 million in term loans was outstanding under the Term Loan B Facility and the Company had no outstanding borrowings under the Revolving Credit Facility.

  The loans under the Senior Secured Credit Facilities may be made to, and the letters of credit under the Revolving Credit Facility may be issued on behalf of, the Company. All borrowings under the Senior Secured Credit Facilities are subject to the satisfaction of customary conditions, including the absence of a default or an event of default and the accuracy in all material respects of representations and warranties.

  Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to, at the Company's option either (a) a base rate determined by reference to the higher of (1) the rate of interest quoted in the print edition of The Wall Street Journal, Money Rates Section, as the Prime Rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation's 30 largest banks) and (2) the federal funds effective rate plus ¹/2 of 1% or (b) a LIBO rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an applicable margin. The initial applicable margin for borrowings under the Senior Secured Credit Facilities was 1.75% with respect to base rate borrowings and 2.75% with respect to LIBO rate borrowings. The LIBO rate in respect of the Term Loan B Facility shall at no time be less than 1%. Interest rates are subject to increase or decrease quarterly based on leverage ratios. As of March 31, 2012, the effective rate of interest on the Company's borrowings under the Revolving Credit Facility, the Term Loan A Facility and the Term Loan B Facility was 4.1%, 3.4%, and 3.8% per annum, respectively.

  In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, the Company is required to pay commitment fees of 0.50% per annum in respect of the unutilized commitments under the Revolving Credit Facility, payable quarterly in arrears and 0.50% per annum in respect of the average aggregate daily maximum amount available to be drawn under the Delayed Draw Facility. The Company also is required to pay letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on LIBO rate borrowings under the Revolving Credit Facility on a per annum basis, payable quarterly in arrears, as well as customary fronting fees for the issuance of letters of credit and agency fees.

  Subject to certain exceptions and customary baskets set forth in the Credit Agreement, the Company is required to make mandatory prepayments of the loans under the Senior Secured Credit Facilities under certain circumstances, including from (a) 100% of net cash proceeds from asset sales outside the ordinary course of business (subject to reinvestment rights), (b) 100% of the net cash proceeds of insurance and condemnation proceeds for property or asset losses (subject to reinvestment rights and net proceeds threshold), (c) 50% of the net cash proceeds from the issuance of equity securities subject to decrease based on leverage ratios, (d) 100% of the net cash proceeds from the incurrence of debt (other than permitted debt as defined in the Credit Agreement) and (e) 50% of Consolidated Excess Cash Flow (as defined in the Credit Agreement) subject to decrease based on leverage ratios.

  The Company is permitted to voluntarily reduce the unutilized portion of the revolving commitment amount and repay outstanding loans under the Revolving Credit Facility at any time without premium or penalty, other than customary "breakage" costs with respect to LIBO rate loans. Except for repayments of outstanding loans under the Term Loan B Facility in connection with certain refinancings on or prior to February 13, 2013, the Company is permitted to voluntarily repay outstanding loans under the Term Loan A Facility and the Term Loan B Facility at any time without premium or penalty, other than customary "breakage" costs with respect to LIBO rate loans. Repayments of outstanding loans under the Term Loan B Facility in connection with certain refinancings on or prior to February 13, 2013 require a prepayment premium of 1% of such loans prepaid.

  The Company's obligations and the obligations of the guarantors under the Senior Secured Credit Facilities and certain hedging arrangements and cash management arrangements entered into with lenders under the Senior Secured Credit Facilities (or affiliates thereof) are secured by first-priority security interests in substantially all tangible and intangible assets of Valeant and the guarantors, including 100% of the capital stock of Valeant and each domestic subsidiary of Valeant, 65% of the capital stock of each foreign subsidiary of Valeant that is directly owned by Valeant or a guarantor that is a subsidiary of Valeant, and 100% of the capital stock of each other material subsidiary of the Company (other than Valeant's subsidiaries), in each case subject to certain exclusions set forth in the credit documentation governing the Senior Secured Credit Facilities.

  The Senior Secured Credit Facilities contain a number of covenants that, among other things and subject to certain exceptions, restrict the Company's ability and the ability of its subsidiaries to: incur additional indebtedness; create liens; enter into agreements and other arrangements that include negative pledge clauses; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; create restrictions on the payment of dividends or other distributions by subsidiaries; make investments, loans, advances and acquisitions; merge, amalgamate or sell assets, including equity interests of the subsidiaries; enter into sale and leaseback transactions; engage in transactions with affiliates; enter into new lines of business; and enter into amendments of or waivers under subordinated indebtedness, organizational documents and certain other material agreements.

  The Credit Agreement requires that the Company maintain a secured leverage ratio not to exceed 2.50 to 1.00 as of the last day of each fiscal quarter beginning with the fiscal quarter ending March 31, 2012. The Credit Agreement requires that the Company maintain an interest coverage ratio of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. The Credit Agreement also contains certain customary affirmative covenants and events of default. If an event of default, as specified in the Credit Agreement, shall occur and be continuing, the Company may be required to repay all amounts outstanding under the Senior Secured Credit Facilities. As of March 31, 2012, the Company was in compliance with all covenants associated with the Senior Secured Credit Facilities.