Evercore ISI's Umer Raffat says the rebound in Valeant Pharmaceuticals (VRX +8.9%) is being largely driven by speculation that the company will execute some level of debt-equity swap as a means to cut its mountain of debt, almost $29B at the end of Q1.
Mr. Raffat says the possibility of a swap further reduces the odds that the equity will be worth nothing. If EBITDA can consistently cover more than just debt service, then it bodes well for price stability/appreciation.
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