Valeant Default Risk Surges As Bond Market Sees 36% Chance Of Bankruptcy

Tyler Durden's picture

Following Valeant's confirmation that it had received a Federal subpoena, most eyes are on the stock's inexorable decline. However, it is the bond market that not only started showing concerns earlier but is now spiking to record credit risk highs. At a cost of 515bps to protect against a Valeant default, based on market-standard recovery rates, the CDS market implies a 36% chance of default for the former Biotech darling.

 

 

Of course, given Bill Ackman's huge positions, we couldn't help but find it ironic if Valeant goes Chapter 11 before Herbalife.

Chart: Bloomberg

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junction's picture

Die, Valeant, Die!

Once the SEC smells bankruptcy, it should send its Inspector Clouseaus in to prepare a case for insider trading.  Triple damages, please.

semperfi's picture

there will be no default - spare me the drama

NoDebt's picture

"Of course, given Bill Ackman's huge positions, we couldn't help but find it ironic if Valeant goes Chapter 11 before Herbalife."

There is nothing more dangerous than an investment manager who is a "true believer in the cause."  Soon as I heard him say he would see HLF put out of business no matter what it takes, I knew the guy was trouble.

Also trouble are investment managers who talk about death a lot (Bill Gross).

CarpetShag's picture

Valeant can hardly be called biotech- practically none of their products are manufactured by the use of biological processes, organisms, or systems. Just another pharmaceutical player gouging 0zerodontcare insurees for standard products. A real biotech player would charge Medicare $120 000 for a year's treatment of an obscure tumor with a patented monoclonal antibody.

orangegeek's picture

Valeant is hq'd in Quebec, Canada.

 

http://www.valeant.com/about/key-facts

 

Expect the socialist gubbamints up there to bail these fucking assholes out.

One And Only's picture

I hope the government regulates the biotech companies and big pharma out of business. That'll teach those evil money loving capitalists.

The government is so flummoxed we have a shortage of doctors. Who the fuck would want to be a doctor today? You get sued for everything because the one thing we need, tort reform, hasn't happened, you're part of some bureaucratic Gordian knot where you can't practice how you want, and soon enough the government is going to mandate wage caps. No thank you.

WillyGroper's picture

Tort reform.

That's the ticket...

For the 3rd leading cause of death in the USSA.

Doc's are being squeezed financially just like the peeps.

buzzsaw99's picture

don't worry about pearson, he got plenty. $65M and counting.

Sudden Debt's picture

Well, if it defaults, it shows us that capitaslime isn't completly destroyed.

If somebody steps up again... I give that a 99% chance... capitalisme has truely failed.

jubber's picture

IBB up $10 LOL

sevensixtwo's picture

If the common interpretation "percent chance of bankruptcy" was correct, we should see a lot more bankruptcy based on these statistics.  I don't mean to imply that there is a lot of bankruptcy coming (there may well be), but my implication is that this interpretation is not great.