Ascendis forges a deal with its lenders to settle R7.61bn debt
ASCENDIS Health yesterday reached an agreement with its lenders for the restructuring and recapitalisation agreement with its creditors Blantyre Capital and L1 Health for the settlement of its outstanding debt of €447 million (R7.61 billion).
However, the group said the proposed transaction required 75 percent of shareholder approval, adding that if it did not receive the required shareholder support, the senior lenders would be able to enforce their rights and Ascendis Health would be placed in business rescue.
The agreement comes after Blantyre Capital and L1 Health increased their exposure to the company’s debt to more than 75 percent of the aggregate exposure of the company’s consortium of external lenders in February.
The South African-based global health and care company was plunged into huge debt when it acquired Cyprus-based Remedica for €260m and Europe’s leading sports nutrition company, Scitec, for €170m in 2016, in a move that was expected to lift the group’s market capitalisation to R11bn.
But the acquisitions failed to yield positive results. Instead the company faced mounting debt, weak earnings growth in the past few years and a market capitalisation of about R410m as of yesterday. Chief executive Mark Sardi said yesterday during the webcast presentation that the group found itself in this position partly due to these acquisitions.
“The acquisitions made in 2016 and 2017 were financed mostly by obtaining debt, and some people believe the company paid a lot of money to land those acquisitions, and the debt has continued to roll over the past few years, which has been problematic for the business,” Sardi said. The group said under the terms of the agreement, lenders would exchange their debt interests for Ascendis Health’s European subsidiaries, Remedica, Sun Wave Pharma and Ascendis’ 49 percent shareholding in Farmalider.
The lenders would also receive the net proceeds from the disposals of Ascendis Health’s South African subsidiaries, Animal Health, Biosciences and Respiratory Care Africa (RCA), all of which were at an advanced stage of sale negotiations. Ascendis Health would retain its divisions in South Africa in Medical Devices, excluding RCA, Consumer Brands and Pharma.
Sardi said the agreement with the lenders was the best outcome for all stakeholders, given the company’s unsustainable debt levels, the cost and terms of the debt and the significant execution risk of the original divestment programme.
“The agreement provides an opportunity to protect the value of the company’s South African assets, as well as the interests of all stakeholders, including shareholders, creditors, suppliers, customers and employees,” Sardi said.
Ascendis Health shares closed 9.09 percent higher at R0.84 on the JSE yesterday.