Bausch Health Cos. Inc. — formerly Valeant Pharmaceuticals — has agreed to pay $1.21 billion to settle a New Jersey class-action lawsuit alleging that the company failed to warn investors amid a drastic drop in share price beginning in 2015.

Shares of Valeant fell from more than $250 in 2015 to under $9 two years later after lawmakers questioned why the price of drugs acquired by the company had more than quadrupled.

In a class-action lawsuit filed in the U.S. District Court of New Jersey, plaintiffs claimed that Valeant executives were liable for making false statements or failing to disclose facts about the company that led to the downfall. Investors argued that the actions caused them to purchase Valeant stock at inflated prices.

The case remained in court through a turnaround effort at Valeant, in which CEO Joseph Papa was brought on and a change of name to Bausch Health was executed. The name came from one of the companies previously acquired by Valeant, eyecare specialist Bausch & Lomb.

The settlement fully resolves the case, according to a Dec. 16 press release from Bausch Health. The company admitted no liability and denied all wrongdoing.

"Resolving this action enables Bausch Health to close the door on one of the more meaningful and unpredictable liabilities associated with the legacy Valeant era," Papa said in a statement. "The settlement of this case removes a cloud of uncertainty and ensures that current and future stakeholders will enjoy the benefits of the ongoing transformation of Bausch Health."

S&P Global Ratings upgraded Bausch Health's credit rating to B+ from B on the news, saying the credit quality is enhanced by a reduction in uncertainty.

"We also believe that Bausch Health's management team, in place since 2016, has made significant progress in resolving legacy management and governance issues from prior management, as well as firmly restoring the company to growth," Ratings said in a Dec. 16 report.

Meanwhile, Moody's Investors Service said the settlement was credit negative because the $1.21 billion represented about one year of Bausch Health's free cash flow, impeding the company's ongoing deleveraging. The agency did not change the credit rating, however.

Bausch Health will begin paying the settlement in mid-January 2020, and the payment will not affect the current 2019 financial guidance.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.