Ascendis: may the Vitaforce be with you

Late yesterday, Ascendis (JO: ASCJ ) released an announcement regarding its recapitalisation and associated transactions.

The share price was down 5.75% on the day but the announcement came out after the close, so the market hasn't reacted to it yet.As a reminder, Ascendis needs to deal with R550 million in debt from the new lenders that was used to get rid of the previous lenders who were somewhat less friendly towards Ascendis.

Make no mistake though: the new lenders aren't here to play games either.

The maturity date of that debt was 31 December 2022, so those following Ascendis closely would've been expecting an update of some kind.

Ascendis has negotiated proposed deals with the new lenders that would see the entire debt be discharged. The company would even have R200 million in cash left over to reinvest.

The company also highlights that these deals alleviate the need for further capex in Ascendis Medical to optimise returns, which would not have been possible with the current balance sheet.

To ease the burden during the implementation of the deals, the debt has been extended to 30 June 2022 (unless the disposals happen sooner) and the interest rate has dropped by 400bps to JIBAR plus 8.33% (which is still very expensive).

Penalty interest will apply if shareholders don't approve the deals.

The entities in Ascendis Pharma would be disposed of to Pharma-Q (one of the lenders) and Imperial (JO: IPLJ ) Logistics, who would acquire 51% and 49% respectively.

Ascendis Pharma markets and distributes prescription and OTC medicines.

The total price is R375 million and this is a Category 1 transaction which requires shareholder approval.The Skin business unit (Nimue) will be sold for R102 million in cash to Amka Products.

That cash will be used to repay a portion of the debt advanced by Pharma-Q. Before the deal is completed, Nimue will sell the Solal branded skincare products business to Ascendis Consumer Brands.

This is a Category 2 transaction which doesn't require shareholder approval.

The Ascendis Medical business distributes medical devices and equipment. It will be sold to Apex Management Services (the other new lender) for a price calculated with reference to a R550 million base price and downward adjustments for the backlog of capital expenditure (R200 million) and excess rental incurred of up to R25 million.

This is also a Category 1 transaction that needs shareholder approval.By this stage, you might be wondering what will be left in Ascendis!

The remaining operation is the Consumer Brands business, which comprises various vitamin, mineral and supplement brands.

The Solal brand mentioned above will also fall in here.

Other brands you might know would include Vitaforce and Junglevite.

The business has manufacturing capability as well.A circular will be sent to shareholders within 60 calendar days.

This will contain the full financial details around the transactions.

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