BELLUS Health Inc. provides financing update and announces restructuring of existing notes
LAVAL, QC, March 31 /CNW Telbec/ - BELLUS Health Inc. (the "Company")
(TSX: BLU) announced today that it has entered into binding letter agreements
with each of Vitus Investments III Private Limited, a corporation whose shares
are beneficially owned by Mr. Carlo Bellini, and Victoria Square Ventures Inc.
(the "Investors") pursuant to which Vitus Investments III Private Limited has
committed to purchase Cdn. $10 million of new convertible notes of BELLUS
Health and Victoria Square Ventures Inc. has committed to purchase Cdn. $10.5
million of such notes, for a total financing commitment of Cdn. $20.5 million.
The obligations of each of the Investors to subscribe for such notes are
subject to a number of customary conditions precedent for a transaction of
this nature, such as the execution of definitive agreements, the granting of
security by BELLUS Health in favour of the Investors, and the obtaining of all
regulatory approvals. In addition, the closing is subject to the restructuring
of BELLUS Health's debt and obligations as described below. Accordingly,
BELLUS Health expects to proceed to the closing of the financing as soon as
possible.
BELLUS Health also announced that three senior executives will step down
from their functions as part of the ongoing restructuring of the Company,
effective April 3, 2009.
The Company has made an application to the Toronto Stock Exchange under
the provisions of Section 604(e) of the Company Manual for an exemption from
any shareholder approval requirement on the basis that the Company is in
serious financial difficulty. A committee of independent directors and the
full board of directors of BELLUS Health have determined that the Company
meets the requirements of such exemption, as well as the exemption from the
application of the related party transaction requirements under National
Instrument 61-101, that the transaction is reasonable in the circumstances and
is designed to improve the financial situation of the Company. As a routine
part of the financial difficulty exemption process, the TSX will commence a
delisting review of the issuer. The issuance of any securities described in
this press release is subject to TSX approval.
Details of the Financing
The new convertible notes to be issued to the Investors will be secured
by a first charge on all of the assets of BELLUS Health and its subsidiaries
and be convertible into common shares of BELLUS Health at Cdn. $0.20 per share
(the "Financing Conversion Price"). Interest will be capitalized on the new
notes at the rate of 15% per year and the notes will mature 5 years from the
date of issuance. The new convertible notes will include customary
anti-dilution provisions, adjustment provisions for a change of control and
negative covenants. The aggregate amount of new convertible notes to be issued
to the Investors will be increased by Cdn. $496,000 as a set up fee in
connection with the financing.
Amendment to Terms of 2026 and 2027 Convertible Notes
Prior to this financing, BELLUS Health and the noteholders have agreed to
amend the terms of the outstanding 2026 and 2027 Convertible notes to either
make them convertible into preferred shares of BELLUS Health and to have those
convertible notes convert into such preferred shares immediately, or to
otherwise amend the existing notes which shall remain outstanding. The
features of the convertible notes to be issued to the Investors, the terms of
the preferred shares as well as the amended terms of the notes are set forth
below. In addition, the landlord of the main premises of BELLUS Health in
Laval, Quebec has agreed to defer certain rental payments and to accept
payment of the deferred rent in cash or common shares of BELLUS Health (at the
then applicable market price) at the option of BELLUS Health at a later date.
The amount of rent or number of shares will depend, among other things, on the
extent to which portions of the premises are sublet or assigned to other
tenants.
The preferred shares to be issued from the authorized capital of BELLUS
Health to certain holders of existing convertible notes will be convertible
into common shares of BELLUS Health at the option of the holder at any time at
a price equal to 200% of Financing Conversion Price (resulting in a conversion
price of Cdn. $0.40 per share) (the "Preferred Share Conversion Price"), shall
be entitled to 6% cumulative dividends payable in cash or common shares of the
Company at the option of the Company and shall be automatically converted into
common shares of the Company at the Preferred Share Conversion Price five
years from the date of issuance. Holders of US$32,585,000 principal amount of
existing convertible notes have agreed to amend the terms of their notes to
make them convertible into the preferred shares. The remaining holders have
agreed to amend their existing convertible notes as set out below.
The amendments to the convertible notes due in 2026 include providing for
a 6% annual interest rate payable in cash or common shares of BELLUS Health at
the option of BELLUS Health at the then applicable market price of the common
shares, replacing the existing conversion rate adjustment period of October
2009 - November 2009 with a period from October 2012 - November 2012 for
conversion of the notes at the then applicable market price of the common
shares of BELLUS Health and replacing the right to have BELLUS Health redeem
the notes in November 2011 with a right to redeem the notes in November 2014
at the then face value of the notes. Holders of US$13.5 million principal
amount of the notes due in 2026 have agreed to so amend the terms of their
notes. A holder of US$500,000 principal amount of convertible notes due in
2027 has also agreed to amend the terms of its notes, including the removal of
certain negative covenants.
BELLUS Health has agreed that the right to redeem the 2026 and 2027
convertible notes, as amended, shall be exercisable 90 days prior to the
maturity date of the new convertible notes to be issued to the Investors. Any
additional unsecured debt, other than operating facilities or debt that is
pari passu or junior in ranking to the convertible notes, as amended, shall
not mature or be redeemable for cash prior to the date on which the redemption
right of the notes comes into effect. In addition, BELLUS Health has agreed to
certain restrictions on its ability to declare or pay dividends in cash while
the convertible notes are outstanding.
The cash savings to BELLUS Health of the restructuring of debt and rental
obligations is expected to be approximately US$4.1 million on an annual basis,
going forward. In addition, BELLUS Health is currently planning other measures
to reduce cash expenses by approximately US$2.0 million per year.
Based on the Financing Conversion Price of Cdn. $0.20 per share, if all
of the convertible notes and preferred shares were to be converted
immediately, the dilution factor (without giving effect to the conversion or
exercise of the existing convertible notes, as amended, or any other
securities or instruments) to existing shareholders of BELLUS Health would be
approximately 80%. If the new convertible notes were to remain outstanding
until maturity, the dilution factor would be approximately 86%. The full
dilution of the financing and restructuring cannot be known at this time given
that certain conversion rates and prices of issuance are only to be determined
in the future as described above.
Senior Executives to Step Down
Dr. Lise Hébert, Vice President, Corporate Communications, Mrs. Judith
Paquin, Vice President, Human Resources, and Dr. Shona McDiarmid, Vice
President, Intellectual Property and Compliance have each announced that they
will be stepping down from their positions at BELLUS Health. As part of the
restructuring of the Company, they will remain consultants to BELLUS Health.
"All three of these executives stepping down have been key members of the
BELLUS Health team for many years and have played important roles with us.
They have demonstrated constant commitment and dedication to the Company, and
they have each made major contributions. We are grateful to them for
everything they have accomplished here. We have already committed to work with
them under different arrangements on the various opportunities that will
present in the future," said Dr. Francesco Bellini, Chairman, President and
Chief Executive Officer of BELLUS Health.
About BELLUS Health
BELLUS Health is a global health company focused on the development and
commercialization of products to provide innovative health solutions to
address critical unmet needs.
To Contact BELLUS Health
For additional information on BELLUS Health and its drug development
programs, please call the Canada and United States toll-free number
1-877-680-4500 or visit the Web Site at www.bellushealth.com.
Certain statements contained in this news release, other than statements
of fact that are independently verifiable at the date hereof, may constitute
forward-looking statements. Such statements, based as they are on the current
expectations of management, inherently involve numerous risks and
uncertainties, known and unknown, many of which are beyond BELLUS Health
Inc.'s control. Such risks include but are not limited to: the ability to
obtain financing immediately in the current markets, the impact of general
economic conditions, general conditions in the pharmaceutical and/or
nutraceutical industry, changes in the regulatory environment in the
jurisdictions in which the BELLUS Health Group does business, stock market
volatility, the availability and terms of any financing, fluctuations in
costs, and changes to the competitive environment due to consolidation, that
actual results may vary once the final and quality-controlled verification of
data and analyses has been completed, as well as other risks disclosed in
public filings of BELLUS Health Inc. Consequently, actual future results may
differ materially from the anticipated results expressed in the
forward-looking statements. The reader should not place undue reliance, if
any, on any forward-looking statements included in this news release. These
statements speak only as of the date made and BELLUS Health Inc. is under no
obligation and disavows any intention to update or revise such statements as a
result of any event, circumstances or otherwise, unless required by applicable
legislation or regulation. Please see the Annual Information Form of BELLUS
Health Inc. for further risk factors that might affect the BELLUS Health Group
and its business.
For further information: Lise Hébert, Ph.D., Vice President, Corporate Communications, (450) 680-4573, lhebert@bellushealth.com
Index of Releases