Special Situations Case Study: Bausch Health

Bausch Health (BHC) is a Canada-based specialty pharma company that develops, manufactures, and markets a broad range of branded and generic pharmaceuticals, OTC products, and medical devices.

Key Metrics
7.6x
RemainCo Total Leverage
2.0x
Fixed Charge Coverage Ratio

Overview

BauschHealth Logo

Bausch Health is in the process of separating its eye health business (B+L) via a spin-off transaction. The transaction, if/when executed, would leave Bausch Health with an over-levered capital structure and a weak collection of supporting assets. A B+L separation in mid-2023 would significantly increase the probability of a medium-term bankruptcy filing by BHC.

Bausch Health launched an exchange offer in August 2022 for all series of senior unsecured notes for new secured notes. The transaction 鈥 which was intended to capitalize on deeply distressed trading levels of BHC鈥檚 senior notes 鈥 allowed for material, one-time leverage reduction, further facilitating the B+L separation.

Despite the exchange transaction and subsequent open market repurchases of debt, we see little chance of BHC limping through its maturity calendar given foreboding walls in 2025-28. Attempts to navigate through upcoming maturities will be even more difficult if/when Xifaxan sees generic competition.

Challenges

Canadian courts have a different process to the US for approving a spin-off transaction. BHC has been working to clear Canadian closing conditions, which include an independent solvency opinion.

BHC faces separate but related lawsuits in both federal and New Jersey courts tied to securities fraud and fraudulent transfer claims. Those suits could require BHC to settle in order to move forward with the B+L separation.

BHC is appealing a 2022 patent ruling with respect to its largest drug, Xifaxan, which accounts for ~40% of BHC total revenues and an even greater percentage of adjusted EBITDA. An adverse appeal ruling could allow for generic competition come 2024/25.

Bausch Health Chart

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BHC has been on our radar since 2020, but it was early August 2021 that the 草莓流氓视频 team started to cover this credit more closely, detailing separation risks and with a recommendation to maintain U/P on long-dated unsecured notes. Our LFI team continued to cover breaking news and provide timely updates on the most important milestones, such as the debt starting to plunge on the Xifaxan patent ruling.

More recently the Covenant Review team of lawyers produced FAQ鈥檚 on the B+L IPO, credit agreements and analyzed incremental investments capacity.聽

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If you want to stay informed about this exchange offer and better understand participation levels, valuation, and implications for BHC鈥檚 financial metrics, then be sure to add the company to your Watchlist on the new 草莓流氓视频 platform.

Bausch Health Company Page

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