Following health and wellness company Ascendis Health’s decision to further extend an interim stability agreement and find a more permanent structure for its existing debt facilities through its lender consortium, the company has, as of June 8, concluded agreements with its lender consortium to restructure its existing debt facilities and provide for the advance of new debt facilities.
Ascendis and its lenders have mutually agreed to extend the repayment obligations on its debt facility to December 2021, with no payments required in advance of that date, other than any excess cash which will be swept to the lenders.
The company states that the extension provides it with the flexibility to continue driving growth and the value of its various businesses and enhance any sale of those businesses to deliver full value to all stakeholders.
The existing debt facilities as at December 31, 2019, comprise euro- and rand-denominated revolving facilities with a total quantum of R5.1-billion.
In addition, a €6-million facility was advanced in April to fund the payment of outstanding deferred vendor liabilities (VL facility) and a further R87-million was advanced to fund the procurement of essential medical equipment for the sales to private and public healthcare sectors in the fight against Covid-19 (Covid facility).
The debt refinance includes the advance of a new super senior facility of €6.9-million and R217-million (super senior facility), which will finance the company’s general liquidity needs and refinance the VL Facility and the Covid Facility.
As a result of the debt refinance, the aggregate debt facilities will be €218-million and R2.1-billion.
The key revised terms of the existing facilities and the super senior facility include facilities being repayable by a single bullet payment on December 31, 2021; a quarterly leverage covenant test (ratio of total net debt to adjusted earning before interest, taxes, depreciation and amortisation) and key disposal milestones in respect of certain business units within the Ascendis Health group.
They also include that an event of default will arise if the requisite majority of shareholders vote against the disposal of specified assets.
In addition, the security package in respect of the existing facilities will remain in place and be bolstered by additional share pledges over a number of Ascendis group companies.
The updated security structure of the funding includes the incorporation of a Luxembourg-domiciled entity in which all European subsidiaries will be housed and a South African domiciled entity in which all South African subsidiaries and the Luxembourg entity will be housed.
The impact on the day-to-day management of the Ascendis Health business of the debt refinance confers a number of operational and strategic benefits. These include that prior to the debt refinance, existing facilities had been reclassified as current liabilities (rather than long-term liabilities).
As a result of the debt refinance, the existing facilities and the super senior facility will be classified as long-term liabilities, with the debt termed out to December 2021.
Ascendis notes that the extended maturity date of the debt facilities will enable a more efficient price discovery in respect of assets earmarked for sale, thereby enabling disposals to be concluded in an orderly manner.
In addition, Ascendis management’s time and attention can now turn from the ‘stabilise’ pillar to the ‘optimisation’ and ‘monetise’ pillars of the group strategy.