Bausch + Lomb's Debt Restructuring: A Strategic Play for Long-Term Resilience in Eye Health

Bausch + Lomb, a global leader in eye health products, has executed a significant refinancing of its debt portfolio through the issuance of €675 million senior secured notes and a $2.325 billion Term B loan facility. This move, finalized in June 2025, marks a pivotal shift in the company's capital structure, designed to extend debt maturities, reduce near-term obligations, and optimize interest costs. The restructuring positions Bausch + Lomb as a financially robust player in a sector projected to grow to $100 billion by 2030, driven by rising demand for contact lenses, surgical products, and ophthalmic drugs.

Capital Structure Overhaul: Extending Maturity and Reducing Liquidity Risks

The core of Bausch + Lomb's refinancing lies in its ability to push debt maturities from 2027 to 2031. The €675 million floating-rate notes (EURIBOR + 3.875%) and the $2.325 billion Term B loans (SOFR + 4.25% or ABR + 3.25%) replaced maturing obligations, reducing the company's debt due within five years by $2.8 billion. This extension creates a liquidity buffer, as only 1% of the Term B loans must be repaid annually until 2031. The will show a sharp decline in near-term repayments, easing refinancing pressures and stabilizing cash flow.

The proceeds also fully repaid revolving credit facilities, eliminating ~$1 billion in short-term debt. This strategic shift aligns with the company's goal to lower leverage—post-refinancing, its first-lien net leverage ratio is projected to drop to 4.0x, within covenant limits.

Interest Cost Optimization: Floating Rates and Covenant Flexibility

The refinancing leverages floating-rate debt to capitalize on current low interest rates. The EURIBOR-based notes and SOFR-linked loans offer cost advantages over fixed-rate alternatives, especially if rates rise modestly. Bausch + Lomb's interest expense savings are estimated at ~15–20%, freeing up ~$100 million annually for R&D and market expansion.

Covenant adjustments further bolster flexibility. While financial covenants (e.g., a 4.0x leverage cap) remain in place, the company's June 2024 compliance and strong EBITDA projections (~$2.5 billion) suggest continued adherence. The Third Amendment also introduced a “springing maturity” clause for the revolving credit facility, which could trigger earlier repayment only under extreme scenarios like a ratings downgrade, minimizing disruptions.

Risks: Leverage, Currency Exposure, and Rate Volatility

The restructuring isn't without risks. Bausch + Lomb's total debt remains substantial (~$9.5 billion), and a sharp rise in EURIBOR or SOFR could erode savings. The company's EUR/USD exposure—with €675M in EUR-denominated debt and USD loans—adds FX volatility, though this is mitigated by natural hedging in its global revenue streams.

Additionally, covenant compliance hinges on maintaining EBITDA margins, which face pressure from pricing pressures in generic eye care products. A would highlight its ability to sustain profitability.

Unlocking Growth: Capital Freed for Innovation and Market Expansion

With reduced debt servicing costs, Bausch + Lomb can reinvest in high-growth areas like surgical robotics and contact lens materials, where its $1.14 billion Bausch + Lomb segment (5% organic growth in 2025Q1) shows promise. The company's $10.4 billion “builder basket” under restrictive covenants allows share buybacks or acquisitions, provided fixed-charge coverage ratios stay above 2.0x. This flexibility is critical in a sector where consolidation is accelerating.

Investment Thesis: A Resilient Play in Eye Health

Bausch + Lomb's refinancing strategically balances risk and opportunity. The extended maturities and covenant-friendly terms reduce near-term insolvency risks, while freed-up capital positions it to capitalize on secular growth in eye care. While leverage and currency exposure are valid concerns, the company's diversified revenue streams (100+ countries) and $400+ product portfolio provide a sturdy foundation.

For investors, Bausch Health (ticker: BHC)—the parent company—now trades at a discounted 5.2x EV/EBITDA, far below peers like Cooper Companies (10.5x). This valuation gap could narrow if operational execution improves, making BHC a compelling long-term hold for those willing to tolerate moderate leverage risks.

Conclusion: A Strategic Move with Long-Term Payoffs

Bausch + Lomb's debt restructuring is a masterclass in capital structure optimization. By extending maturities, lowering interest costs, and retaining covenant flexibility, the company has insulated itself from liquidity shocks while positioning to invest in high-growth areas. While risks persist, the strategic clarity and sector tailwinds suggest Bausch Health is a resilient bet for investors focused on the eye health megatrend.

Investors should monitor EBITDA stability and debt maturity dates closely, but the current structure offers a sustainable path to growth.