In January 2022, the Company retired approximately US$99.7 million of the Exchangeable Notes as part of a debt re-financing. This represented approximately 99.7% of the total Exchangeable Notes. Consideration was in cash and an issue of ‘A’ Ordinary shares. The cash paid was US$86.73 million with each holder that was party to the agreement receiving US$0.87 of cash per US$1 nominal value of the Exchangeable Notes. The shares consideration was 5,333,000 ADSs (21,332,000 ‘A’ Ordinary shares) representing the equivalent of US$0.08 of the Company’s ADS (based upon the 5-day trailing VWAP of the ADSs on NASDAQ on December 9, 2021, discounted by 13%) per US$1 nominal value of the Exchangeable Notes, as partial consideration for the exchange of the Exchangeable Notes. The shares consideration is valued at US$6.13 million based on market price on the date of issue.
The Exchangeable Notes were treated as a host debt instrument under IFRS with embedded derivatives attached. The embedded derivatives related to a number of put and call options which were measured at fair value in the Income Statement. On initial recognition in 2015, the host debt instrument was recognised at the residual value of the total net proceeds of the note issue less fair value of the embedded derivatives. Subsequently, the host debt instrument was measured at amortised cost using the effective interest rate method.
At date of disposal, the carrying value of the extinguished Exchangeable Notes was US$83.2m. As the IFRS measure of consideration was higher by US$9.7 million, the resulting loss on disposal was recorded as a financial expense in the period ended June 30, 2022. The remaining nominal value of the Exchangeable Notes at June 30, 2022 is US$210,000 and this is shown within Current Liabilities.
The movement in the Exchangeable Notes balance was as follows:
| | | Six-month period ended June 30, 2022 | | | Year ended December 31, 2021 | |
| | | US$000 | | | US$000 | |
Balance at January 1 | | | (83,312 | ) | | | (82,664 | ) |
Accretion interest | | | (83 | ) | | | (648 | ) |
Repaid to Note holders | | | 86,730 | | | | 0 | |
Shares issued to Note holders as consideration | | | 6,133 | | | | 0 | |
Loss on disposal | | | (9,678 | ) | | | 0 | |
| | | | | | | | | |
Liability | | | (210 | ) | | | (83,312 | ) |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX-MONTH PERIOD ENDED JUNE 30, 2022
| 11. | BORROWINGS (continued) |
During the six months ended June 30, 2022, the Company acquired two new debt liabilities, as follows:
| | (i) | Senior secured term loan |
The Company and its subsidiaries entered into a US$81.3 million senior secured term loan credit facility in December 2021 (the “Term Loan”) with Perceptive Advisors, an investment manager with an expertise in healthcare. The Term Loan was drawn down in January 2022, when the necessary shareholder approvals were obtained. The 48-month term loan will mature in January 2026 and accrues interest at an annual rate equal to 11.25% plus the greater of (a) one-month LIBOR (later changed to the Term SOFR Reference Rate effective from October 28, 2022) and (b) one percent per annum, and interest is payable monthly in arrears in cash. The term loan does not require any amortization, and the entire unpaid balance will be payable upon maturity. In connection with the Term Loan the Company agreed to issue warrants to Perceptive for 2.5 million of the Company’s ADSs. The per ADS exercise price of the Warrants is US$1.30. The warrants are exercisable, in whole or part, until the seventh anniversary of the date of drawdown of the funding under the Term Loan.
At the discretion of the Company, the Term Loan can be repaid, in part or in full, at a premium before the end of the four-year term. In May 2022, the Company repaid US$34.5 million of the term loan principal and incurred an early payment penalty of approximately US$3.5 million, which has been recorded as a financial expense in the period ended June 30, 2022.
In accordance with IFRS accounting standards, the Term Loan is represented by three separate balances in the balance sheet. US$44.0 million is shown in Long Term liabilities as a senior secured term loan. At initial recognition, the balance comprised the principal loan amount of US$81.25 million less loan origination costs of US$3.6 million, less two derivative financial balances totalling US$1.7 million to give a balance of US$76.0 million. In the six-month period ended June 30, 2022 accretion interest of US$2.5 million was accrued and the repayment of US$34.5 million reduced the liability to leave a closing carrying value of US$44.0 million. The early repayment of a portion of the Term Loan necessitated an accretion interest adjustment of US$2.1 million in the six months ended June 30, 2022, recognised as a financial expense, to discount the revised expected future cash flows for the loan.
The other two balances related to the Term Loan are: a) a derivative financial asset and b) a derivative financial liability. The fair value of the derivative financial asset is estimated at US$140,000 at June 30, 2022 and represents the value to the Company of being able to repay the Term Loan early and potentially refinance at a lower interest rate. The fair value of the derivative financial liability is estimated at US$2.0 million at June 30, 2022 and represents the fair value of the warrants issued to Perceptive. The fair value remeasurement for these two derivative financial balances resulted in a financial expense of just under US$0.2m being recognised in the Income Statement.
| | (ii) | 7-year convertible note |
In May 2022, the Company announced a US$45.2 million strategic investment and partnership with MiCo Ltd (“MiCo”). MiCo, a KOSDAQ-listed and Korea-based company, is engaged in the biomedical business through its affiliate MiCo BioMed. The investment consists of an equity investment of US$25.2 million and a seven-year, unsecured junior convertible note of US$20.0 million. The convertible note has an interest rate of 1.5%. The convertible note mandatorily converts into ADSs if the volume weighted average price of the Company’s ADSs is at or above US$3.24 for any five consecutive NASDAQ trading days. For further details on the convertible note, refer to the Company’s Form 6-K filings with the SEC on April 11, 2022.
The convertible loan note is accounted for as a compound financial instrument containing both an equity and liability element. The debt component is accounted for at amortised cost in accordance with IFRS 9. At June 30, 2022, the carrying value of the convertible note’s debt component was US$13.4 million and accretion interest of US$120,000 has been recognised as a financial expense in the six-months ended June 30, 2022. The equity component of the convertible note is US$6.7 million and has been recorded in the equity section of the Balance Sheet. There is no remeasurement of the equity element following initial recognition.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX-MONTH PERIOD ENDED JUNE 30, 2022
| 11. | BORROWINGS (continued) |
The movement in the Term Loan and the 7-year convertible notes in the six months ended June 30, 2022 is summarised as follows:
| | | Senior secured term loan | | | 7-year Convertible Note | |
| | | US$000 | | | US$000 | |
Balance at January 1, 2022 | | | 0 | | | | 0 | |
Principal amount loaned | | | (81,250 | ) | | | (20,000 | ) |
Loan origination costs | | | 3,551 | | | | 39 | |
Derivative financial liability at date of issue | | | 1,872 | | | | 0 | |
Derivative financial asset at date of issue | | | (202 | ) | | | 0 | |
Equity component at date of issue | | | 0 | | | | 6,709 | |
Accretion interest | | | (2,461 | ) | | | (120 | ) |
Cash repayment of principal | | | 34,500 | | | | 0 | |
| | | | | | | | | |
Non-current liability at June 30, 2022 | | | (43,990 | ) | | | (13,372 | ) |
The movement in the derivative financial liability in the six months ended June 30, 2022 was as follows:
| | | US$000 | |
Balance at January 1, 2022 | | | 0 | |
Derivative financial liability at date of issue of Term Loan | | | (1,872 | ) |
Fair value adjustments in the period | | | (130 | ) |
| | | | | |
Non-current liability at June 30, 2022 | | | (2,002 | ) |
The movement in the derivative financial asset in the six months ended June 30, 2022 was as follows:
| | | US$000 | |
Balance at January 1, 2022 | | | 0 | |
Derivative financial asset at date of issue of Term Loan | | | 202 | |
Fair value adjustments in the period | | | (62 | ) |
| | | | | |
Non-current asset at June 30, 2022 | | | 140 | |
