Valeant Credit Rating Downgraded By Moody's After Weak Earnings

Moody's Investors Service on Tuesday downgraded Valeant International Pharmaceutical Inc.'s rating to B3 from B2 after the company slashed guidance for 2016 and said weakness would persist into 2017. The outlook on the rating is negative, meaning Moody's might lower it again in the near term. The B3 rating is six notches into speculative grade, or "junk" status. The action reflects the company's challenges in turning around its specialty pharmaceuticals business, which has resulted in weak earnings trends and financial leverage that is above Moody's expectations. "Incorporating recent operating trends as well as exposure to upcoming patent expirations, we anticipate that Valeant's debt/EBITDA will remain above 7.0x at least through 2017," Moody's Senior Vice President Michael Levesque said in a statement. That is turn is expected to make the company more vulnerable to setbacks or legal liabilities that stem from government investigations of its activities. Valeant's most active bonds, the 6.125% notes due April 2025 were last quoted at 77 cents on the dollar, according to MarketAxess.