Ascendis Health’s descent continues as lenders demand immediate debt repayment

Wellness company Ascendis Health must cough up the money it owes its lenders

  • Ascendis Health held a general meeting on Monday following a court order requiring it to do so.
  • In October, the company reached a recapitalization deal with lenders Blantrye Capital and L1 Health after being left with R7.7 billion in debt.
  • Part of the agreement provided that Ascendis would not make changes to its board of directors without the prior written approval of the lenders’ agent.

Ascendis Health’s hastily reconvened Annual General Meeting (AGM) on Monday may have been a costly mistake for the wellness company, after effectively triggering the cancellation of a deal it had struck with its lenders.

As a result, the owner of Solal and Junglevites may have to sell its pharmaceutical and consumer businesses to repay its lenders. It also has the option to sell the pharmaceutical business and have a rights issue.

Another possible option is for Ascendis to have a binding commitment letter and term sheet for the financing, or a financing agreement for the repayment of its debt.

The company, which was set up in 2008 by Karsten Wellner, found itself in the crosshairs of its lenders when it racked up R7.7 billion in debt. For a while, it appeared to have avoided the corporate bailout by striking a recapitalization deal with its lenders, Blantrye Capital and L1 Health, in October.

The terms of the agreement provided that the lenders would obtain Ascendis’ Cyprus-based pharmaceutical business, Remedica, as well as its Sun Wave Pharma business in Romania. This would be in addition to proceeds from the welfare company’s animal health business and Respiratory Care Africa business.

In return, the lenders would provide Ascendis with €15m (~R269m) over two years, and an additional €20m for transaction and headquarters restructuring costs, as well as working capital.

However, the wellness company found itself in trouble again after its court-ordered annual general meeting on Monday. Shortly after announcing that the meeting would take place, Ascendis received a letter from the lending agent reminding it that changes to the board of directors without prior written approval could result in cancellation of its debt facilities, making payment payable immediately.

The AGM itself was controversial, with shareholder Cambridge Investments going to the Gauteng High Court last weekend to compel Ascendis to hold the meeting after initially postponing it to next month. The postponement follows a complaint and threat of litigation by another group of shareholders, should the meeting go ahead.

After reinstating the meeting on Monday, shareholders voted for new board members, including founder Karsten Wellner and Gary Shayne, who led the company when it began its downward spiral, ultimately bringing about the fall of the its share price by more than 97% over the past five years. year. The group has also appointed its former CEO Andrew Marshall as its new CEO, following the resignation of Mark Sardi.

The reinstatement of the meeting and its outcome drew mixed reviews, with some shareholders supporting it, while others said they preferred the postponement.

For Retail Activist Investors, holding the AGM on the original date on Monday made the most sense.

Harry Smit, spokesman for Retail Activist Investors – a group that has spoken out on corporate governance and operations – said the second postponement was unprofessional.

Smit was elected Monday as a non-executive director, giving activists a stronger voice in the company.

But the final outcome of the AGM has drawn criticism, with some saying the people who oversaw the group when it began to crumble have been re-elected to the board.

Smit said it was misinterpreted.

“I’m not saying the old board was perfect, there are boards that make mistakes, but they’re not there to take on a chair or to take on CEO roles. They’re there because they know the business inside and out,” he said. .

He added that finding new people would take months and that the business needed to continue to operate with people who know it and understand the industry at the helm.

Shareholders are at odds over whether Ascendis should be delisted, which the board is still considering. They also disagree on the company’s growth strategy going forward, Smit said.

Piet Viljoen, executive director and portfolio manager at Counterpoint, said the composition of the new board reflects the wishes of the majority of shareholders. But he agreed that the composition of the board takes Ascendis back to where its problems began.

As for the timing of the AGM, Viljoen said he would have preferred it to take place later, as it was too late to change his votes from the postponed initial meeting, since Ascendis had sent the notice on morning of the meeting.

As for Ascendis’ other issues, he said as a passive outside minority shareholder, his view was irrelevant.

“However, I am sure there are tensions between the shareholders as the company has valuable assets. But it is also riddled with debt. Restructuring a private company is much easier and more efficient than trying to in a publicly listed company. environment.”

The wellness group’s share price fell nearly 11% on Wednesday afternoon.

Tana T. Thorsen