Biocartis Group Announces Recapitalization and Wind Down Agreement; Deal Foreshadows Other Likely Future Debt Restructurings in Med-Tech

Biocartis Group NV, a molecular diagnostics company, has unveiled a comprehensive recapitalization and balance sheet restructuring agreement with its Secured Creditors. This significant move aims to materially reduce the operating business’s debt burden by EUR 132 million while injecting EUR 40 million of new equity capital to ensure business continuity and strengthen the balance sheet. The agreement involves the enforcement of security by the Secured Creditors, leading to a change in ownership of Biocartis’s assets and the formation of New Biocartis as a new holding company.
Key highlights of the agreement:
1. Recapitalization and Deleveraging: The Secured Creditors, comprising First Lien Creditors and Bondholders, will become the primary owners of Biocartis’s operating business by equitizing the EUR 116 million 4.5% Second Ranking Secured Convertible Bonds due 2026. Bondholders will provide an Equity Injection of EUR 40 million to recapitalize New Biocartis, ensuring financial stability.
2. Ownership Change: The Transaction will result in an ownership change through security enforcement by the Secured Creditors, who will own New Biocartis, the new unlisted holding company for Biocartis’s operating subsidiaries. This change is not expected to impact customers, suppliers, partners, or employees.
3. Impact on Shareholders: Shareholders of Biocartis Group NV will not receive any distribution from the security enforcement and are expected to receive nothing during the wind-down process.
4. Unsecured 4.00% Convertible Bonds: The interests and claims of the EUR 16 million unsecured 4.00% convertible bonds due 2027 will be written down to zero as part of the enforcement.
5. Completion Timeline: The Transaction is expected to be completed by the end of 2023, subject to regulatory approvals.
Biocartis’s CEO, Roger Moody, emphasized that while the Transaction may be disappointing to shareholders and unsecured bondholders, it is necessary to address the company’s leverage and liquidity issues. The injection of EUR 40 million in new equity capital, along with substantial deleveraging, is expected to support the business’s path to operational break-even.
The recapitalized holding company, New Biocartis, aims to continue Biocartis’s mission of enabling universal access to personalized medicine by making molecular testing convenient, fast, and suitable for any laboratory. It is forecasted to reach operational break-even by the end of 2024, with strong revenue growth, industry-standard gross margins, and EBITDA margin projections. The Transaction is subject to the consent of First Lien Creditors and Bondholders, with more than 90% of Bondholders already providing binding support. The recapitalization efforts are fully backed by supporting Bondholders to ensure funding certainty.
Overall, this agreement represents a strategic step to strengthen the financial health and sustainability of Biocartis, ensuring the continuity of its mission to provide innovative molecular diagnostics solutions. Debt restructurings such as the one Biocartis are likely to become more common going forward given a number of small med-tech companies with limited access to capital given market conditions and significant debt burdens.