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Overview

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 – which was intended to capitalize on deeply distressed trading levels of BHC’s senior notes – 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.

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BHC has been on our radar since 2020, but it was early August 2021 that the ²ÝÝ®Á÷Ã¥ÊÓƵ 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’s on the B+L IPO, credit agreements and analyzed incremental investments capacity. 

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