Valeant Credit Analysts Disagreed About Its Debt Earlier This Month

A pair of top Wall Street firms aren’t on the same page when it comes to the outlook for Valeant Pharmaceuticals Intl Inc VRX senior notes. In a March 21 report, Citi analyst Murali Ganti said that the resignation of CEO Michael Pearson and the addition of Bill Ackman to the Board of Directors should go a long way in stabilizing the volatile stock. In addition, Citi sees plenty of value in Valeant debt.

“We believe today’s announcements will go some way towards stabilizing sentiment, and despite being cautious on the long road ahead for the company, we reiterate our Buy ratings on all of the company’s maturities of 2022 and inside,” Ganti wrote.

Related Link: NY Times Breaks Down 7 'Main Theories' On Valeant

Barclays analyst Shubhomoy Mukherjee isn’t buying it. On March 15, Mukherjee slammed Valeant for its aggressive cuts to 2016 guidance and downgraded its senior notes from Overweight to Market Weight.

Mukherjee admits that these senior notes currently trade at a large discount to those of similarly-levered healthcare stocks such as Acadia Healthcare Company Inc ACHC and Amsurg Corp AMSG, but Barclay’s doesn’t think the risk is worth the potential reward.

“Given expected ratings risk, uncertainties regarding how the company will evolve strategically, and concerns about management’s credibility and ability to navigate the business through a challenging operating environment, we see limited room for outperformance in the near term,” Mukherjee concluded.

Disclosure: the author holds no position in the stocks mentioned.