So basically, Blantyre and L1 run the show now. Shareholders are at their mercy. I see no positive in that. Management has failed to drive this company out of the debt mess so these guys have hijacked it and they'll get their pound of flesh. Management is in no position to dictate any terms to them, they own the company's debt.
Yes agreed, however shareholders still need to agree on any equity fund raising. This needs to be approved by way of a special resolution.
And Blantyre and L1 want the company to succeed and to be there in future as they have seen great potential here. I mean for them they could have just said ok lets sell all assets and we get our loans repaid. Done story. However they see more potential here.
So what might their plans be? I doubt they want a rights issue as with a rights issue they would not get a larger portion of Ascendis equity. Also a rights issue would dilute the current shareholders fully if they don't take up the rights. And we currently know that they do not hold a substantial portion of the shares.
So what other possibilities are there on the table? Companies can swap debt for equity or vice versa. So I think this is the most likely possibility. Under this instance we would convert parts of the debt into equity. So we would have a new biggest shareholder. Now the other question will be how much debt do we even need to convert? And at what price? Currently we have around 6 Billion debt. A healthy debt-to-equity ratio is at 3 times. So given an EBITDA of around 1.5 Billion our debt levels should sit at 4.5 billion or less. So this would mean we would need to convert 1.5 to 2 billion Rands of loans. At a current share price of 70 cents this would mean ASC would need to issue 2.5 billion shares. This is not feasible and would not be approved by current shareholders.
So what now? Blantyre and L1 would need to "pay a higher price" to get a bigger stake in ASC. I would think that they do not want a controlling interest. So lets assume they aim for 40 to 49% of the share capital. This would be roughly 450 Million shares. So if a debt to equity swap will be on the table it will most likely be at a higher price. I would say at around 3 Rands or even higher to be approved at a special resolution.
This would be a genius move by Blantyre and L1. After such a transaction is complete they own a stake of 40 to 49% of a fast growing strong cash generating holding company and it would cost them less than 100 Million Euros.
In the open market they would have had to pay 500 Million for just Remedica. Now they get Remedica and all other businesses.
I think they are also the ones holding the share price down currently.
All I want to say guys is that there is huge potential for us in here and these okes have seen it. I'll be waiting for that announcement. A great future lies ahead of ASC.
Again this is just my personal opinion and no recommendation to trade in this share. I'm just brainstorming some ideas.
What do you guys think? Any other possible ideas?
in relaunching good businesses with temporary financial challenges