Valeant Shatters Creditor Calm

What happens when debt markets lose confidence in a company's bonds.

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Valeant Pharmaceuticals International Inc. is losing the confidence of its biggest investor base: debt markets that lent the drugmaker more than US$30 billion to fund its rapid expansion.

The company’s bonds plunged Tuesday by the most ever, pushing the yield on its most actively traded securities above 10 percent for the first time after it slashed its forecast for the year and warned that it may breach debt agreements. Standard & Poor’s and Barclays Plc lowered their outlook on the debt, and Moody’s Investors Service cut its credit rating on the company deeper into junk.

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