The clock is ticking for Ascendis Health

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The clock is ticking for Ascendis Health

After closing around 14.5% lower yesterday at R0.65 per share, Ascendis Health Ltd (JO: ASCJ ) is trading slightly above the levels where it languished for most of 2021.

The company would've hogged the headlines even in a busy period, but the situation is worse when there's very little other news on the market. All eyes are on this company and its ongoing fight for survival.

The predatory lenders are experts at ensuring that their legal rights are extensive and watertight. Perhaps having foreseen the risk of a change at board level, they negotiated the right to make the debt immediately payable in the event of any changes to directors that they don't approve of.

Needless to say, an AGM that was reconvened at the last minute (under order from the High Court) amid much confusion on effective voting rights is not the type of thing that the lenders wanted to see. Another outcome they didn't want to see was the appointment of shareholder activists to the board.Some stability has at least been achieved at CEO-level, as Andrew Marshall has agreed to be appointed to that role.

He previously served as CEO at Oceana (JO: OCEJ ) Group and Nampak (JO: NPKJ ).

He also served as Acting CEO of Ascendis for several months in 2019 and more recently as Chairman of the embattled group.I certainly don't envy Marshall's job.

The lenders have now exercised the right to be paid immediately, which triggers many highly onerous terms in the financing agreements. An agreement has been entered into with the lenders which would avoid immediate enforcement action provided several milestones are achieved.

Those involved in these milestones won't be having the holiday between Christmas and the new year that was hoped for.For example, by no later than 3pm on 29 December 2021, there need to be signed and dated agreements for the disposals of the Pharma and Consumer Health divisions, or there needs to be an agreement for the disposal of the Pharma division and a commitment for a rights issue that is sufficient to settle the debt, or some other financing agreement that injects enough cash into Ascendis to settle the debt.

Irrevocable undertakings from shareholders and directors demonstrating support for any such fundraising activities would also be required.In the event of a rights issue or any other fundraising to plug the hole, documents would need to be concluded and delivered to the lenders by 3pm on 6 January 2022.

The lawyers will have to take it easy on New Years Eve.The next milestone is to receive irrevocable undertakings from shareholders of at least 50% of shares in issue to vote in favour of any required resolutions.

These undertakings must be in place by 15 January 2022.Finally, a general meeting to approve the relevant steps must be held by no later than 28 February 2022.As a final kick in the teeth for Ascendis shareholders, the default rate of interest on the debt now applies (400bps higher than the current rate) and any costs associated with the actions by the lenders will be for the account of Ascendis.

The company clearly needs to scramble for a solution. The clock is ticking.

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