I Was Mistaken: Valeant/Bausch + Lomb Pro Forma 2013 Leverage Is More Like 5.8 To 1

I was wrong — earlier today, I guessed that 2013 combined leverage would approach 5 to 1. It actually is approaching 6 to 1, even on management’s own calculations.

Apparently, Valeant just filed an SEC Form 8-K, containing its slide deck for this morning’s potential lenders’ pitches.

Where I come from, there used to be a difference between “pro forma” statements and “projected” financial tables. Moreover, when one assembled pro formas that included projected future savings” — one used to call the resulting tables “pro forma projected” selected financials.

Take a look (click to enlarge) — but 5.88 to one is very highly levered — with neither company reporting GAAP EPS last year (due to their respective interest expense burdens):

Were I being asked to lend into this scenario, I’d be concerned that — even using managment’s own Total Debt to EBITDA figures, management has chosen to round down, from 4.7 to 1 — to 4.6 to 1, when conventional rounding rules (actual math) would require 4.7 to 1 — as the expressed ratio.

This, I think, is a warning sign — of management, private equity players and investment bankers who are pushing just a little too hard.

To think the would-be lenders don’t see right through them is. . . a little unsophisticated. These folks are only hurting their own credibility — if their intentions honorable, and their hearts pure. And, if they intend to fleece anyone — this is a red flag: beware.


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