Fitch Ratings on Oct. 6 said it downgraded Bausch Health Companies ( NYSE: BHC ) and Bausch Health America's (BHA) Issuer default ratings (IDRs) to RD (Restricted Default) from C and upgraded the IDRs to CCC following the distressed exchange.
The two-step rating actions reflect the agency's recording of the Restricted Default related to the distressed debt exchange and subsequent re-rating of the post exchange capital structure.
Fitch's rating actions came after Bausch Health's completion of a Distressed Debt Exchange (DDE) with BHC's and BHA's senior unsecured issuances.
Bausch Health's CCC IDRs reflect the agency's view that there is substantial credit risk and default is a real possibility in spite of the debt reduction achieved in the exchange and the lack of debt maturities until late 2025, Fitch noted.
The rating agency added that a material part of cashflows from Xifaxan are at-risk and default and refinancing risk would increase more if Bausch Health advance its separation of Bausch + Lomb ( NYSE: BLCO ) and/or before a favorable resolution of Xifaxan.
Xifaxan (rifaximin) is used for treating irritable bowel syndrome with diarrhea.
In September, Bausch Health said that Xifaxan's patent protection is till July 24, 2029 thus a tentatively approved generic version of the drug developed by Norwich Pharmaceuticals' is not expected to hit the U.S. market until then.
Fitch also assigned assigned a 'B-'/'RR2'/Negative Watch rating to Bausch Health newly issued second-lien debt.
The agency said the Rating Watch Negative on the second-lien debt reflects the risk of further downgrades if BHC furthers its separation of BLCO related specifically to lower recovery prospects in the event of default and independent of any related rating actions on the IDRs should that event occur.
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Fitch cuts Bausch Health to RD, upgrades to CCC after distressed debt exchange