TIDMAVO
RNS Number : 1498G
Advanced Oncotherapy PLC
17 July 2023
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information for the purposes of Regulation 11 of the Market Abuse
(Amendment) (EU Exit) Regulations 2019/310. With the publication of
this announcement, this information is now considered to be in the
public domain.
ADVANCED ONCOTHERAPY PLC
("Advanced Oncotherapy", "AVO" or the "Company")
Prospective recapitalisation and funding plan
Update on Formal Sale Process
Introduction
Advanced Oncotherapy (AIM: AVO), the developer of
next-generation proton therapy systems for cancer treatment,
announces a prospective recapitalisation and funding plan to raise
up to c.GBP110 million. The prospective plan comprises three
elements: (i) a debt to equity conversion (the "Debt to Equity
Swap"); (ii) the Company receiving a new interest-bearing secured
loan; and (iii) an equity fundraising (the "Equity Fundraising")
(together the "Prospective Recapitalisation Plan").
As at the date of this announcement the Prospective
Recapitalisation Plan, which is still at an early stage, is subject
to, amongst other things, a number of conditions being satisfied
and various documentation being negotiated, agreed and entered
into. Whilst the board of Advanced Oncotherapy is hopeful of a
satisfactory outcome, certain elements of the Prospective
Recapitalisation Plan, in particular the Equity Fundraising, remain
at an early stage and there can be no certainty that it will
proceed nor to the terms or timing thereof.
On 30 June 2023, the Company announced, inter alia, that
additional funding of c.GBP8 million, which the Company had been
working to secure, was no longer a viable financing option in the
short term and that the Company was in a highly constrained
financial position and required additional financing urgently.
Following this the Company's shares were suspended from trading on
AIM on 30 June 2023 pending clarification of its financial
position.
Since this announcement, the Company has entered into
discussions with a number of investors to provide bridge financing
to alleviate these immediate financing needs. In the absence of any
additional financing being available in the immediate term, the
Company would need to take steps to preserve and maximise value for
its creditors, including the possible appointment of an
administrator.
In light of the financial position of the Company, the Company's
annual report and accounts for the year ended 31 December 2022 (the
"2022 Annual Report") are not capable of being published at the
current time and the Company's shares remain suspended from trading
on AIM.
The Prospective Recapitalisation Plan
The Prospective Recapitalisation Plan is an important step for
the Company to outline how it plans to address its financial
challenges. The Company is hopeful it will unlock the Company's
prospects and ensure that Advanced Oncotherapy has strong
foundations to progress its strategy of democratising proton
therapy. The Prospective Recapitalisation Plan is subject to the
Company finalising terms with a number of counterparties, entering
into documentation and obtaining various shareholder approvals at a
general meeting to be convened in due course. including authorities
to issue new shares and a proposed capital reorganisation (as set
out in more detail below).
If the Company remains in receipt of an approach from or in
discussions with a potential offeror, various elements of the
Prospective Recapitalisation Plan will also require shareholder
approval under Rule 21 of the City Code on Takeovers and Mergers
(the "Takeover Code"), as set out below.
The Prospective Recapitalisation Plan can be summarised as
follows:
Financing transactions Target amount Reference Note
Debt to Equity Swap
and debt repayment GBP25.7-GBP37.4m A) (1)
------------------ ----------- -----
GBP10 million secured GBP10.0m B)
loan
------------------ ----------- -----
Equity Fundraising GBP61.7-GBP73.5m C) (2)
------------------ ----------- -----
TOTAL c.GBP110m
------------------------------- -----
(1) Debt range reflects whether the GBP10m Nerano Pharma
Ltd/Credit Suisse loan is converted, refinanced, or repaid, as well
as the proportion of the GBP6.4m secured convertible note facility
being converted; (2) Equity range determined by the amount of debt
converted, per Note 1.
A) The Debt to Equity Swap and debt repayment
As at 30 June 2023, the Company had GBP33.1 million of financial
borrowings plus accrued interest, comprising of the following:
Lender Amount Interest Maturity Note
Nerano Pharma Ltd GBP8.3m 5.00% p.a. Jun-23 (1)
---------- --------------- ---------- -----
Nerano Pharma Ltd GBP4.0m 15.00% p.a. Jul-24 (2)
---------- --------------- ---------- -----
LIBOR + 2.00%
Nerano Pharma Ltd/Credit Suisse GBP10.0m p.a. Sep-23 (3)
---------- --------------- ---------- -----
Nerano Pharma Ltd GBP1.5m 1.25% p.m. Jun-22 (4)
---------- --------------- ---------- -----
French lender GBP2.7m - Feb-25 (5)
---------- --------------- ---------- -----
Other GBP0.1m - Jun-23 (6)
---------- --------------- ---------- -----
Various lenders (secured convertible
note facility) GBP6.4m 1.25% p.m. Jan-24 (7)
---------- --------------- ---------- -----
TOTAL GBP33.1m
--------------------------------------- -----
(1) As per announcement dated 29 June 2020; based on a $/GBP
exchange rate of 1.2; maturity assumed rolling; (2) As per
announcement dated 7 August 2019; (3) As per announcement dated 10
May 2019; (4) As per announcement dated 25 March 2022; maturity
assumed rolling; (5) As per announcement dated 1 March 2023; (6)
Maturity assumed rolling; (7) As per announcements dated 1 March
2023 and 5 May 2023.
Nerano Pharma Limited ("Nerano") and Barrymore Investments
Limited ("Barrymore") are companies controlled by Mr Seamus
Mulligan and respectively own 4.1% and 1.5% of the Company's
current issued share capital. Nerano, Barrymore and Mr Seamus
Mulligan are presumed to be acting in concert (the "Concert Party")
for the purpose of the Takeover Code.
-- Subject to negotiating terms and conditions and finalising
documentation, Nerano has agreed in principle to convert all or
part of its debt holdings (i.e. up to GBP23.8 million or GBP27.8m
when including accrued interests) into new ordinary shares in the
Company of 25p each ("Ordinary Shares" and, in the case of the
Ordinary Shares that may be issued to Nerano, the "Conversion
Shares") at a price equivalent to the issue price of the Equity
Fundraising (the "Issue Price"). In the event that this would
result in the Concert Party's interest in the Company exceeding
30%, the conversion of Nerano's debt will be subject to the Panel
on Takeovers and Mergers (the "Panel") granting a waiver (a
"Waiver") of Nerano's obligations under Rule 9 of the Takeover Code
and the approval of independent shareholders of the Company at a
general meeting of such a Waiver (a "Waiver Resolution").
-- As per the Company's announcement of 1 March 2023, various
lenders who hold GBP6.4 million of secured convertible loan notes
will have the option to convert their secured convertible loan
notes into Ordinary Shares at a price that is equivalent to a 20%
discount to the Issue Price. It is anticipated that once the
Company publishes the 2022 Annual Report and the Directors are not
being restricted by virtue of the Company being in a closed period,
all Directors who subscribed for secured convertible loan notes,
amounting to GBP1.1 million, will agree to convert their secured
convertible loan notes into Ordinary Shares. The Company is hopeful
that a total of GBP 4.8-GBP6.4 million (or GBP5.3-GBP7.1 million
when including accrued interest over a nine-month period) of the
secured convertible loan notes will be settled by the issue of new
Ordinary Shares.
Should the Prospective Recapitalisation Plan become effective
and the proposed refinancing be completed, the Board intend that
the GBP2.7 million loan to the French lender, as set out above,
would be repaid in cash.
Shares in lieu of fees
In addition, subject to obtaining the necessary shareholder
approvals and reaching agreement with the various counterparties
summarised below, the Company intends to satisfy amounts owed to
various parties as follows through the issue of new Ordinary Shares
at the Issue Price:
-- the Company is hopeful that GBP 0.5-GBP2.0 million of
payables to certain suppliers will be settled in new Ordinary
Shares at the Issue Price (the "Supplier Fee Shares"). Negotiations
with selected suppliers are ongoing;
-- certain employees, including Executive Directors, have agreed
in principle to receive part of their compensation for an amount of
up to GBP 0.5 million through the issue of new Ordinary Shares at
the Issue Price (the "Employee Compensation Fee Shares");
-- certain directors have agreed in principle to receive their
fees for an amount of GBP 0.6 million in new Ordinary Shares at the
Issue Price (the "Director Fee Shares"); and
-- the Company is hopeful that fees due to a number of
counterparties, including certain financial advisers, for an amount
of approximately GBP 0.2 million will be settled through the issue
of new Ordinary Shares at the Issue Price (the "Advisor Fee
Shares").
The issue of Employee Compensation Fee Shares and/or Director
Fee Shares to certain parties, including directors and other
persons discharging managerial responsibility ("PDMRs"), will be
subject to the Company publishing its 2022 Annual Report and the
directors/PDMRs not being restricted by virtue of the Company being
in a closed period.
The above initiatives are currently at a preliminary stage and,
as noted, are subject to agreement with the counterparties and
various conditions being met. There can be no certainty that any or
all of the above initiatives will be implemented. If the above
initiatives are fully implemented GBP25.7-37.4 million of the
Company's current debt and payables would be converted into new
Ordinary Shares. If fully implemented, the Prospective
Recapitalisation Plan is estimated to reduce the Company's
indebtedness by up to a total of GBP28.4-GBP40.1 million. This
range reflects whether the GBP10m Nerano Pharma Ltd/Credit Suisse
loan is converted, refinanced, or repaid, as well as the proportion
of the GBP6.4m secured convertible note facility being
converted.
B) GBP10 million secured loan
Further to the Company's announcement on 30 June 2023 regarding
discussions with a new lender to provide c.GBP8 million of
additional financing for the Company, the Company remains in
discussions with the same lender for a secured debt facility of an
increased amount of GBP10 million (the "Loan"). Based on
discussions to date, it is anticipated that the interest rate
payable on the Loan would be 12 per cent. per annum and the Loan
would be repayable in full in cash at the end of a 24-month period.
The Loan would be conditional on the Prospective Recapitalisation
Plan being approved by shareholders and implemented.
There can be no guarantee that the Loan will be put in place nor
as to the timing or the terms and conditions of the Loan. Based on
discussions to date and subject to finalisation of the terms of the
Loan, the Directors anticipate that the Loan will be made available
once the relevant shareholder approvals have been obtained in
relation to the Prospective Recapitalisation Plan at a general
meeting of the Company's shareholders to be convened in due
course.
C) Equity Fundraising
The Prospective Recapitalisation Plan will require the Equity
Fundraising to be implemented in conjunction with, inter alia, the
proposed Debt to Equity Swap and the proposed Loan. The Prospective
Recapitalisation Plan assumes a minimum fundraising of c.GBP61.7
million pursuant to the Equity Fundraising. The Company intends to
implement the Equity Fundraising through: (i) a subscription of new
Ordinary Shares; (ii) a placing of new Ordinary Shares through SI
Capital, the Company's joint broker; (iii) the issue of a broker
option to SI Capital; (iv) a retail offer and/or open offer to the
Company's existing shareholders; and (v) equity facility financing
arrangements.
At this stage discussions on the Equity Fundraising remain at an
early stage and there can be no certainty that these discussions
will be successfully concluded. The Equity Fundraising would be
subject, inter alia, to the Company obtaining the necessary
shareholder authorities at a general meeting and the Company
publishing its 2022 Annual Report.
The Company is mindful of the support of existing shareholders
and is committed to providing them with the ability to participate
in the Equity Fundraising through a retail offer and/or open offer
at the Issue Price. Up to a maximum of GBP5 million (being below
the EUR8 million threshold which would require the publication by
the Company of a prospectus under the Prospectus Rules) would be
sought to be raised by the Company pursuant to a retail offer
and/or open offer.
Financing agreement
Subject to the approval of shareholders, the Company intends to
enter into a flexible and staged equity financing agreement (the
"Equity Financing Agreement") with a financing institution pursuant
to which the financing institution will agree, subject to various
conditions being satisfied, to subscribe for tranches of new
Ordinary Shares in the Company up to a maximum investment of GBP30
million. At this stage, the Company is currently in receipt of
non-binding term sheets regarding the Equity Financing Agreement.
The Equity Financing Agreement will give the Company the ability to
drawdown pursuant to the facility at various dates, the full
details being subject to final documentation.
There can be no certainty that the Equity Financing Agreement
will be entered into with a financing institution.
Warrants
The Company expects that warrants to subscribe for new Ordinary
Shares will also be issued as part of the Prospective
Recapitalisation Plan. Further details of the terms of the Warrants
will be provided in due course, but are anticipated to include:
-- the issue of Warrants to participants in the Prospective
Recapitalisation Plan, including members of the Concert Party, on
the basis of one warrant for every two new Ordinary Shares which
they subscribe for in the Prospective Recapitalisation Plan (the
"Warrants" and, in the case of the Concert Party, the "Concert
Party Warrants");
-- the Warrant exercise price is expected to be set at a 25%
discount to the market price of an Ordinary Share immediately prior
to the first patient being treated with the LIGHT system; and
-- the option to exercise the Warrants within a two-month period
after the first patient has been treated with the LIGHT system.
Conditions to the Equity Fundraising
Any Equity Fundraising will be conditional, inter alia, on the
approval by the Company's shareholders of resolutions to provide
authority to the Directors to issue and allot further Ordinary
Shares on a non-pre-emptive basis and the capital reorganisation
outlined below. If the Company remains in receipt of an approach
from or in discussions with a potential offeror, various elements
of the Equity Fundraising will also require shareholder approval
under Rule 21 of the Takeover Code, as set out below.
Capital reorganisation
In addition to obtaining the shareholder approvals noted above,
in order to implement the Prospective Recapitalisation Plan, it
will be necessary to first implement a capital reorganisation of
the Company. At the date of this announcement there are 542,573,869
existing Ordinary Shares of 25 pence each in the capital of the
Company in issue. The middle market share price of each Ordinary
Share as at close on the date prior to suspension of trading in the
Company's shares on 30 June 2023 was 1.925 pence, giving the
Company a market capitalisation of GBP10.4 million. The Directors
consider that the number of existing Ordinary Shares is not only
unwieldly in volume for a company of Advanced Oncotherapy's market
capitalisation, but when combined with the prevailing share price,
is not conducive to an orderly market. Accordingly, the Directors
believe that a consolidation of share capital will result in a more
appropriate number of shares in issue for a company of Advanced
Oncotherapy's size in the UK market.
In addition, the Company proposes to further undertake a
sub-division as, under the Companies Act 2006, a company is
prohibited from issuing new shares at a price less than the nominal
value of its shares. Accordingly, in order to implement the
Prospective Recapitalisation Plan, it will be necessary to reduce
the nominal value of the Ordinary Shares to below the proposed
Issue Price. Further details of the proposed consolidation and
sub-division, which will be subject to shareholder approval, will
be sent to shareholders in due course.
Conditions to the Prospective Recapitalisation Plan
In addition to the conditions set out elsewhere in this
announcement, in the event that the final terms agreed in relation
to the Debt to Equity Swap result in the Concert Party's interest
in the Company exceeding 30%, the Debt to Equity Swap and issue of
the Concert Party Warrants to members of the Concert Party will be
conditional on:
-- the grant by the Panel of a Waiver subject to the approval of a Waiver Resolution; and
-- approval by independent shareholders of a Waiver Resolution.
Further, various elements of the Prospective Recapitalisation
Plan will also be subject to shareholder approval for the purpose
of Rule 21 of the Takeover Code if the Company remains in receipt
of an approach from or in discussions with a potential offeror
pursuant to the Formal Sale Process (see below) or otherwise.
The Company will update shareholders further as it progresses
its Prospective Recapitalisation Plan.
Update on Formal Sale Process
The Company announced on 18 April 2023 the commencement of a
strategic review and formal sale process under the Takeover Code
(the "Formal Sale Process").
Whilst the Prospective Recapitalisation Plan has been the
Company's primary focus, the Company remains in discussions under
the Formal Sale Process with strategic players in the radiotherapy
sector.
There can be no certainty that any offer will be made for the
Company, or even proposed, or as to the terms of any proposal or
offer that may be made.
Takeover Code
Under Rule 9 of the Takeover Code, any person who acquires an
interest (as such term is defined in the Takeover Code) in shares
which, taken together with the shares in which he and persons
acting in concert with him are interested, carry 30% or more of the
voting rights in a company which is subject to the Takeover Code,
is normally required to make a general offer to all of the
remaining shareholders to acquire their shares. Similarly, when any
person, together with persons acting in concert with him, is
interested in shares which in aggregate carry not less than 30% of
the voting rights but does not hold shares carrying more than 50%
of the voting rights of such a company, a general offer will
normally be required if any further interests in shares are
acquired by any such person. Such an offer would have to be made in
cash at a price not less than the highest price paid by him, or by
any member of the group of persons acting in concert with him, for
any interest in shares in the Company during the 12 months prior to
the announcement of the offer.
The Concert Party currently owns in aggregate 5.6% of the
Company's issued share capital. The final terms to be agreed in
relation to the Debt to Equity Swap may result in the Concert
Party's interest in the Company exceeding 30% of the issued share
capital as a consequence of the issue of the Conversion Shares to
Nerano and the conversion of associated Concert Party Warrants.
In these circumstances, the issue of the Conversion Shares and
the conversion of any Concert Party Warrants would ordinarily give
rise to an obligation on the Concert Party to make a mandatory
offer for the Ordinary Shares they do not already own under Rule 9
of the Takeover Code. Accordingly, prior to completion of the
Prospective Recapitalisation Plan and subject to finalisation of
the terms of the Prospective Recapitalisation Plan, the Company may
need to seek a Waiver of the obligations under Rule 9 of the
Takeover Code.
A Waiver will require the passing of a Waiver Resolution on a
poll by the independent shareholders of the Company at a general
meeting.
Frustrating Action under Rule 21 of the Takeover Code
Under Rule 21 of the Takeover Code, whilst the Company remains
in receipt of an approach from or in discussions with potential
offerors, as defined in the Takeover Code, certain elements of the
Prospective Recapitalisation Plan would constitute frustrating
action under Rule 21 of the Takeover Code.
Accordingly, should this still be relevant, the Company will
seek either consent from any potential offeror or will seek the
approval of shareholders at a General Meeting to implement such
elements of the Prospective Recapitalisation Plan.
Further announcements on the Prospective Recapitalisation Plan
will be made at the appropriate time.
Advanced Oncotherapy Plc www.avoplc.com
Dr. Michael Sinclair, Executive Chairman Tel: +44 (0) 20 3617
8728
Nicolas Serandour, CEO
WH Ireland Limited (Financial adviser) Tel: +44 (0) 20 7220
1666
Antonio Bossi / James Bavister AVOPLC@whirelandcm.com
Allenby Capital Limited (Nomad and
Joint Broker)
Nick Athanas / Piers Shimwell (Corporate Tel: +44 (0) 20 3328
Finance) 5656
Amrit Nahal / Matt Butlin (Sales &
Corporate Broking)
SI Capital Ltd (Joint Broker)
Nick Emerson Tel: +44 (0) 1483 413
500
Jon Levinson Tel: +44 (0) 20 3871
4066
About Advanced Oncotherapy Plc www.avoplc.com
Advanced Oncotherapy Plc, a UK headquartered company with
offices in London, Geneva, The Netherlands and in the USA, is a
provider of particle therapy with protons that harnesses the best
in modern technology. Advanced Oncotherapy's team "ADAM," based in
Geneva, focuses on the development of a proprietary proton
accelerator called, Linac Image Guided Hadron Technology (LIGHT).
LIGHT's compact configuration delivers proton beams in a way that
facilitates greater precision and electronic control.
Advanced Oncotherapy Plc will offer healthcare providers
affordable systems that will enable them to treat cancer with
innovative technology as well as expected lower treatment-related
side effects.
Advanced Oncotherapy Plc continually monitors the market for any
emerging improvements in delivering proton therapy and actively
seeks working relationships with providers of these innovative
technologies. Through these relationships, the Company will remain
the prime provider of an innovative and cost-effective system for
particle therapy with protons.
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