BioPharma Credit PLC
27 March 2024
This announcement contains inside
information as defined in the Market Abuse Regulation No. 596/2014
as it forms part of UK Domestic Law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR").
BIOPHARMA CREDIT
PLC
(THE
"COMPANY")
UPDATES TO THE DISCOUNT
CONTROL MECHANISM
BioPharma Credit PLC (LSE:
BPCR), the specialist life sciences debt investor, announces the
following updates to its Discount Control Mechanism ("DCM")
following consultation with certain shareholders that hold, in the
aggregate, a majority of the Company's shares.
Under the current terms of the DCM,
as originally described in the Company's Prospectuses dated 1 March
2017 and 14 March 2018, and subsequently revised as of 7 November
2022, if the shares of the Company trade at a discount greater than
5 per cent. over a three-month period (the "First Trigger"), the
Company is required to apply up to 50 per cent. of proceeds from
debt repayments in purchasing Company shares until such time that
the two-week discount is less than 5 per cent. In addition, if the
discount is greater than 10 per cent. over a six-month period (the
"Second Trigger"), the Company is required to apply up to 100 per
cent. of proceeds from debt repayments until such time that the
two-week discount is less than 5 per cent.
Currently, the Company continues to
operate with the Second Trigger activated and must therefore
reserve the entirety of US$155 million to purchase shares, which
the Company has been pursuing at scale. During the first two months
of 2024 the Company acquired approximately 49 million shares at a
total cost of US$46 million at an average price of US$0.93 yet the
current discount remains at 10.23%.
As previously announced on 15 March
2024, the Company was unable to participate in the new additional
US$100,000,000 senior secured loans to UroGen Pharma, Inc. due to
adherence with the DCM. The current coupon of the foregone UroGen
investment is SOFR + 7.25 per cent., or 12.80% at current SOFR
rates excluding additional fees payable upon drawing. Continued
adherence to the current formulation of the DCM will result in the
Company being unable to participate in any new investments until
the DCM condition is satisfied.
While the Investment Manager and the
Board firmly believe in the value of a discount control mechanism,
they also believe that being prevented from deploying considerable
available resources in any new investment opportunities due in
large part to adverse market conditions, is not in the best
interest of shareholders:
·
While the near-term accretion from share
repurchases can be attractive, this ignores the significant
opportunity cost of foregoing new investments with compelling
return characteristics that would help the continued
diversification of the portfolio.
·
As a result of current market conditions for
investment companies, even large repurchases are having a limited
impact on discounts to NAV.
·
Holding back cash to fund future repurchases, as
opposed to investing in new loans, has a material cash drag effect.
Meanwhile funding new investments using debt while holding
significant cash is also not in the best interest of the
Company.
·
On 28 December 2023, 94.06% of the voting
shareholders of the Company voted in favor of approving the
continuation of the Company's business as a closed-ended investment
trust.
Revised Terms of the DCM
As a result, the Investment Manager
and the Board believe it is in the best interest of the Company to
update the DCM so as to provide for greater flexibility as to when
the Company can freely deploy capital:
·
The First Trigger will remain at a 5 per cent.
discount to NAV and the Company will be required to use up to
US$25,000,000 in any given fiscal year of the principal being
returned to repurchase shares until such time that the discount to
NAV over a two-week period is less than 5 per cent.
·
The Second Trigger will remain at a 10 per cent
discount to NAV and the Company will be required to use up to
US$50,000,000 in any given fiscal year of the principal being
returned to repurchase shares until such time that the discount to
NAV over a two-week period is less than 5 per cent.
·
For the remainder of calendar year 2024 the
Company will be required to use up to an additional US$50,000,000,
on top of purchases made up to this date, to repurchase shares
until such time that the discount to NAV over a two-week period is
less than 5 per cent.
·
The Company may continue to repurchase shares in
excess of the abovementioned thresholds in its discretion based on
the then current trading price and volume in order to reduce the
discount to NAV.
·
The Company will be free to use cash on hand in
excess of the aforementioned amounts to make new
investments.
The Board will consider future
changes to the DCM if it considers them to be in the best interest
of the Company and the shareholders. The Company intends to
continue to purchase shares opportunistically with available
capital even if the DCM triggers have not been reached. There will
be no changes to the requirement of the Investment Manager to use a
portion of the proceeds earned as incentive compensation to
purchase shares under certain share price scenarios.
Revised DCM language
If, in any 3 month rolling period,
the Shares have, on average, traded at a discount in excess of 5
per cent. to the Net Asset Value per Share (calculated by comparing
the middle market quotation of the Shares at the end of each month
in the relevant period to the prevailing published Net Asset Value
per Share (exclusive of any dividend declared) as at such month end
and averaging this comparative figure over the relevant period),
the Company will, subject to meeting its Target Dividend, use up to
US$25,000,000 of the Company's capital proceeds generated after the
conclusion of such 3 month rolling period in any fiscal year, to
repurchase Shares at least until such time as the Shares trade at
an average discount of 5 per cent. or less to the Net Asset Value
per Share over a 2 week rolling period.
If, in any 6 month rolling period,
the Shares have, on average, traded at a discount in excess of 10
per cent. to the Net Asset Value per Share (calculated by comparing
the middle market quotation of the Shares at the end of each month
in the relevant period to the prevailing published Net Asset Value
per Share (exclusive of any dividend declared) as at such month end
and averaging this comparative figure over the relevant period),
the Company will, subject to meeting its Target Dividend, use up to
US$50,000,000 of the Company's capital proceeds generated after the
conclusion of such 6 month rolling period in any fiscal year, to
repurchase Shares at least until such time as the Shares trade at
an average discount of 5 per cent. or less to the Net Asset Value
per Share over a 2 week rolling period.
Previous DCM language
If, in any 3 month rolling period,
the Shares have, on average, traded at a discount in excess of 5
per cent. to the Net Asset Value per Share (calculated by comparing
the middle market quotation of the Shares at the end of each month
in the relevant period to the prevailing published Net Asset Value
per Share (exclusive of any dividend declared) as at such month end
and averaging this comparative figure over the relevant period),
the Company will, subject to meeting its Target Dividend, use 50
per cent. of the Company's capital proceeds generated after the
conclusion of such 3 month rolling period, to repurchase Shares at
least until such time as the Shares trade at an average discount of
5 per cent. or less to the Net Asset Value per Share over a 2 week
rolling period.
If, in any 6 month rolling period,
the Shares have, on average, traded at a discount in excess of 10
per cent. to the Net Asset Value per Share (calculated by comparing
the middle market quotation of the Shares at the end of each month
in the relevant period to the prevailing published Net Asset Value
per Share (exclusive of any dividend declared) as at such month end
and averaging this comparative figure over the relevant period),
the Company will, subject to meeting its Target Dividend, use 100
per cent. of the Company's capital proceeds generated after the
conclusion of such 6 month rolling period, to repurchase Shares at
least until such time as the Shares trade at an average discount of
5 per cent. or less to the Net Asset Value per Share over a 2 week
rolling period.
Enquiries
Buchanan
David Rydell / Mark Court / Jamie
Hooper / Henry Wilson
+44 (0) 20 7466 5000
biopharmacredit@buchanan.uk.com
Notes to Editors
BioPharma Credit PLC is London's
only specialist debt investor to the life sciences industry and
joined the LSE in March 2017. The Company seeks to provide
long-term shareholder returns, principally in the form of
sustainable income distributions from exposure to the life sciences
industry. The Company seeks to achieve this objective primarily
through investments in debt assets secured by royalties or other
cash flows derived from the sales of approved life sciences
products.
-Ends-