Biotech firm to ‘potentially breach’ £16m loan covenant test

Leeds-based regenerative medical devices company Tissue Regenix Group says it will fail a covenant test for a $20m/£16m loan it secured in June of this year.

The listed business had signed an agreement with MidCap Financial Trust to access credit facilities composed of a term loan of $15m/£11.7m and a revolving credit line of up to $5m/£3.9m.

The loan was structured into three tranches, providing Tissue Regenix with cash until 2021 on then current forecasts.

In its update on the loan released today, Tissue Regenix states: “The terms of the loan credit facility entered into with MidCap Financial for a term loan and revolving credit facility include certain financial covenants which are tested periodically.

“One of these covenants is a trailing 12 month revenue test which is scheduled to be tested as at 31 October 2019 no later than the end of November 2019.

“Based on the data available to the company the Board are of the view that the company will fail this covenant test.

“On that basis, the Board has proactively engaged with MidCap Financial in respect of this potential breach and is currently in discussion in relation to the consequences of this.

“These discussions are progressing well and the Board is optimistic of being able to agree a solution with MidCap Financial.

“As at 8 November, being the last practicable date ahead of the announcement, the company had drawn down $7.5m of the Term Loan and $0.6m of the revolving credit facility. The company’s cash balance as at 31 October 2019 was $9.3m.”

As reported last month, Tissue Regenix issued a profit warning which sent the firm’s shares down 20%. The company said it also expected its revenues to be 15-20% lower than investors had forecast this year.

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