Thursday, November 5, 2015

"boom bust echo chop" vrx Edward Vranic, CFA, $7B assets $42B liabilities, $420M interest payments each Q

The more worrisome scenario for VRX shareholders was not that Valeant was unwilling to pay or did not know it owed anything to PDLI for three months, but that it was UNABLE to pay. Valeant's balance sheet as of September 30 shows $1.4 billion in cash and $7 billion in total current assets against $42 billion in total liabilities including $4.7 billion in current liabilities and $30 billion in debt. With $420 million in interest payments due for the quarter and every quarter thereafter that is by no means a healthy balance sheet, but it should be sufficient to make $16.9 million worth of royalty payments on time instead of playing a deadbeat that says "the check is in the mail" for several weeks. This means that VRX's leverage could be so stretched to its tipping point that a negative event like, say, losing one channel that accounts for 6% of its sales or coming under price scrutiny from a U.S. Government inquiry would put it into immediate financial jeopardy.

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