Needing to solve its debt predicament before the end of this year, Karolinska Development has launched negotiations with its largest convertible note holder, Sino Biopharmaceutical.
Karolinska Development, the investment arm of Karolinska Institute, used its annual report for 2018 to update investors on a perilous debt situation that is threatening its continued operations.
Karolinska Development must prepare for a convertible loan that will mature on December 31 with a liability of approximately SEK484m ($50.6m) unless the instrument is switched for shares. The unit also has an outstanding $5.2m credit facility due in November 2019.
Karolinska Development’s cash availability at the end of last year amounted to $9.7m, and the company must secure fresh capital by the end of 2019 to avert financial distress.
To that end, Karolinska Development is aiming to convince its main convertible note holder, pharmaceutical firm Sino Biopharmaceutical, to offset its loans against the shares it owns in the unit.
Plans are underway for a rights issue of equity to Karolinska Development’s shareholders during the second half of 2019, and it hopes to identify other potential remedies with the assistance of financial institutions.
In the annual report, Karolinska Development’s board of directors said: “These conditions indicate that there is significant uncertainty that can lead to considerable doubt regarding the company’s ability to continue its operations. We have not modified our opinion because of this.”
