Ascendis considers an equity raise to tackle debt
The company has ascribed an increase in financial gearing to the weaker rand and increased short-term debt facilities
Ascendis Health, which is looking to raise funds by selling assets, is also considering another equity capital raise to help it reduce its hefty debt burden.
The group, whose healthcare brands include Solal and Bettaway, said on Monday net bank debt climbed from R4.8bn to R5.3bn in the six months ended December because of the weaker rand — most of its debts are in euros — and an increase in short-term loans.
The company’s shares had fallen 5.3% to R4.47 by early Monday afternoon, implying that its market capitalisation was now less than half its net bank debt figure. The market values Ascendis at R2.2bn, a 63% decline in less than six months in part because of forced share sales by the group’s main investor, Coast2Coast.
Based on a key debt metric, the company is now almost in breach of its agreements with lenders, its interim results show. And it has some large payments due, including R879m worth of deferred payments for acquisitions, which are due in the three months ending September 2019.
To get on top of its debt problem, Ascendis is in talks to sell most of its biosciences businesses as well as its direct-selling operation. It is also in talks to sell its Remedica business, which accounts for a third of its earnings.
Meanwhile, Ascendis has appointed EY to advise it on a capital restructure, finance chief Kieron Futter said on Monday.
As part of that process, the company was seeking short-term support from its existing lenders.
Futter said Ascendis was also considering an equity capital raise, even though the group’s shares have lost more than three-quarters of their value since the last equity raise in December 2017.
That time around, it received negligible interest from investors, barring Coast2Coast, which forked out more than R700m to buy 37-million newly issued Ascendis shares at R20 apiece. However, Coast2Coast sold more than 5% of the company’s shares in 2018 in order to meet obligations to lenders.
Futter said Ascendis had considered launching a high-yield bond, but the company decided not to go ahead with that plan after banks advised against it.
Ascendis CEO Thomas Thomsen said the decline in the group’s share price “limited our room to manoeuvre”.
The company was maintaining “an arms-length relationship” with forced-seller Coast2Coast, which has a seat on the Ascendis board, Thomsen said.
He said a sale of the Remedica business would have “significant implications on our strategic direction”, which meant a review of the group’s strategy would be needed.
The group said recently it had received an unsolicited offer for Cyprus-based Remedica. Thomsen said on Monday Ascendis had appointed advisers for the deal and had decided to field offers from other bidders.
Ascendis said on Monday its normalised headline earnings fell 6% to R351m in the six months ended December.
A 1% decline in sales in SA was offset by a 7% sales increase from the international business, which now accounts for half the group’s revenue.
Ascendis said it had total liabilities of R9.1bn.
Correction: March 20 2019
An earlier version of this piece indicated that the market value of Ascendis declined largely because of forced share sales by the group’s main investor, Coast2Coast. The decline was, in fact, only due in part because of forced share sales by Coast2Coast. We regret the error.