Bausch + Lomb's Debt Refinancing: A Strategic Move to Unlock Financial Flexibility and Growth Potential

Bausch + Lomb, a global leader in eye health products, has executed a significant refinancing initiative in June 2025, upsizing its debt facilities to €675 million in senior secured notes and securing a $2.325 billion Term B loan. This strategic move aims to extend debt maturities, reduce near-term repayment pressure, and free capital for growth. Here's why this refinancing could mark a pivotal shift in the company's trajectory.

Key Details of the Refinancing

The upsized facilities include:
1. Senior Secured Floating Rate Notes (€675 million):
- Due in 2031, priced at 99.5% of par.
- Interest rate: EURIBOR + 3.875% (with a 0% floor).
- Proceeds will refinance €600 million of existing debt and cover fees.

1. $2.325 Billion Term B Loan Facility:
2. Interest rate: SOFR + 4.25% or ABR + 3.25%.

3. Repays existing term loans due in 2027 and reduces near-term liabilities by $2.8 billion.

4. $800 Million Revolving Credit Facility:

5. Provides liquidity for operational needs and potential acquisitions.

The closing of these facilities is expected by June 26, 2025.

Strategic Benefits: Reducing Debt Pressure and Freeing Capital

The refinancing extends debt maturities from 2027 to 2031, pushing over $2.8 billion of obligations into a longer timeframe. This reduces refinancing risks and stabilizes cash flow, as only 1% of the Term B loan must be repaid annually until maturity.

Interest Cost Reduction:
The floating-rate structure capitalizes on current low rates, lowering interest expenses by an estimated 15–20% annually—saving ~$100 million. These savings will fuel growth initiatives, such as:
- R&D in Surgical Robotics: Expanding into high-margin segments like intraocular lenses and ophthalmic devices.
- Advanced Materials for Contact Lenses: Competing in the $100 billion global eye care market, projected to grow at 6% annually.

Covenant Flexibility:
The refinancing maintains a 4.0x leverage cap, achievable with projected EBITDA of ~$2.5 billion. A “springing maturity” clause in the revolving credit facility delays repayment until extreme scenarios (e.g., credit rating downgrades), further stabilizing liquidity.

Strategic Growth Opportunities

The $10.4 billion “builder basket” under restrictive covenants allows Bausch + Lomb to pursue acquisitions or share buybacks while maintaining fixed-charge coverage above 2.0x. This flexibility positions the company to capitalize on consolidation trends in the eye health sector.

Risks and Considerations

1. Interest Rate Exposure: Floating rates (EURIBOR/SOFR) could rise, though the company's extended maturities reduce urgency for near-term refinancing.
2. Currency Volatility: EUR/USD fluctuations pose risks, but global revenue diversification (operations in 100+ countries) mitigates this.
3. EBITDA Pressure: Generic eye care products face pricing competition, requiring operational efficiency to maintain margins.

Investment Implications

Bausch + Lomb trades at a discounted 5.2x EV/EBITDA versus peers like Cooper Companies (10.5x), offering upside potential if growth strategies succeed. The refinancing reduces leverage risks and aligns with the company's goal to unlock value through innovation.

Investment Advice:
- Buy: For investors seeking exposure to the eye health sector, Bausch + Lomb's refinanced structure and growth focus make it a compelling long-term play.
- Hold: Monitor EBITDA trends and debt maturity schedules; near-term volatility may persist amid macroeconomic uncertainty.

Conclusion

The June 2025 refinancing is a decisive step toward stabilizing Bausch + Lomb's balance sheet and positioning it to capitalize on sector growth. By extending maturities, reducing interest costs, and retaining flexibility for strategic moves, the company has set the stage for sustained value creation. While risks remain, the refinancing marks a credible shift toward resilience and growth.