Biopharma Credit Share Discussion Threads

[williamcooper104] 13/11/2023 16:41

US BDCs have mostly had a great year Double digit yields, no big discounts to NAV

[davebowler] 13/11/2023 16:39

htTPs://citywire.com/new-model-adviser/news/david-stevenson-private-credit-is-hot-but-uk-listed-debt-funds-are-not/a2430301?re=114609&refea=252901

[williamcooper104] 05/11/2023 13:22

Looks like the management team leaving to go get money to buy it out of C11

[davebowler] 05/11/2023 11:45

hTTps://citywire.com/investment-trust-insider/news/biopharma-problems-mount-as-directors-resign-from-lumiradx/a2429472?re=114469&refea=252901

[jonwig] 02/11/2023 08:02

Another update, resignations at LumiraDx:

[davebowler] 01/11/2023 11:13

Liberum -Routine passing of continuation resolution very likely
Analyst: Shonil Chande

Mkt Cap £885m | Share price $0.83 | Prem/(disc) -20.2% | Div yield 8.5%

Event

BioPharma Credit has traded at an average discount above 10% over the 12-month rolling period to 31 October 2023, triggering a continuation resolution. A general meeting must therefore be convened, proposing a continuation resolution by 31 December 2023.

Liberum view

We expect the continuation resolution to pass without incident. This is a vehicle with a strong track record (five-year annualised NAV total return of 9.4%), high distribution capacity, and the potential to significantly return capital via repurchases and deliver another special dividend. BPCR’s current inability to support its shares through repurchases is a result of having two observer seats on the LumiraDx board. C.98% of the portfolio has exposure to floating rate loans and the $0.07 dividend is comfortably covered, excluding the LumiraDx loan. BPCR is thought to have over $220m in cash following Reata Pharmaceuticals̵7; acquisition in August.

BPCR last repurchased shares on 11 July 2023. Given the size of the current discount and BPCR’s capacity to invest a significant portion of its market cap into repurchases, there is potential for material NAV accretion. BPCR repurchased over $50m in shares last year, at a buyback yield of c.3.9%. Within Alternatives, this was the second-largest figure in absolute terms after Balanced Commercial Property (£58m). BPCR’s repurchases represented 16.1% of overall volumes last year (4.8% YTD) and 78% of volumes on the days it was active in the market.

Once the LumiraDx loan is cleared up, we would expect a significant increase in share buybacks and the company is also expected to pay a special dividend this year, which it has done each year since 2017.

[jonwig] 01/11/2023 07:09

Continuation resolution triggered:



Board recommends acceptance.

[davebowler] 27/9/2023 12:07

Assuming Lumirax is c. 15% of the assets then the current discount of c.20% to NAV in effect guards against the worst.
Net asset value per Ordinary Share, including current
period revenue, was 102.39 cents -price today is 84 cents

[davebowler] 27/9/2023 11:59

Liberum-

Floating rate loans make up 98% of portfolio now
Analyst: Joachim Klement

Mkt Cap £892m | Share price $0.83 | Prem/(disc) -18.7% | Div yield 8.4%

Event

The company released its half-year results for the period ending 30 June 2023. The NAV was previously reported as $1.0178 (up from $1.0139 at end-2022 for a 3.8% NAV total return).

In the first six months of 2023, the company made total investments of $195m, consisting of a $37.5m loan to ImmunoGen on 11 April 2023, $120m for the loan to BioCryst on 19 April 2023, and $37.5m for the loan to Reata on 11 May 2023. On 26 September, Biogen closed on its acquisition of Reata leading to a prepayment of the Reata loan at a significant uplift. The company received $62.5m plus $15.6m in prepayment and make whole fees.

At period end, the company had $157m in cash and $67m available in its credit facility. Post period end, the company made additional investments of $41m, reducing cash holdings (and cash drag) accordingly.

The company provided no new information on the distressed LumiraDX loans. LumiraDX is currently considering strategic alternatives and the investment manager remain actively engaged with LumiraDX to resolve the situation.

Liberum view

The distressed LumiraDX loans are hanging over the fund and prevent the shares from trading at a smaller discount to NAVV, though arguably, the investment portfolio is of high quality and the IRRs generated by the investment advisor are best-in-class. We expect a significant re-rating as the LumiraDX situation gets resolved but that may take time.



In the meantime, we note that the company is shifting more and more toward floating rate loans. At 30 June floating rate notes made up 98% of the portfolio, up from 81% at end-2022. This resulted in an increase of investment returns to $79m in the first half of 2023 compared to $77m in the same period last year. This shift to floating rate notes will come with both and bad changes to the cash flow profile of the fund. In the current high-interest environment, investment income increases with only a short lag and loan valuations do not fluctuate as much as interest rates change. On the flip side, we expect central banks to cut interest rates in H2 2024 as we explained in our First Look into 2024 published yesterday (). This means that investment income will decline as interest rates decline again, creating a lower dividend cover. In essence, the company traded a more stable NAV development for a more volatile income stream.

[hpcg] 27/9/2023 11:13

Redemption fees make up a lot for losses. I don't know what the balance looks like but I bet they have received more for early settlements than a wipe out at LumiraDX, were it to happen. If that 10-1 ratio can be maintained then the risk is much better than the headline. In other words there is an actual reward for being a smart manager. I'm more interested in buying than I have been for a while.

[jonwig] 27/9/2023 10:27

Loans are secured, but the nature of the assets isn't so clear. Also, a surprising number of their borrowers get taken out, producing early redemption fees.

The bigger pharma trusts are talking of an upturn in the sector, which might be worth looking out for.

Not clear either way, but I'll hold.

[williamcooper104] 27/9/2023 09:59

Problem is their extreme loan concentrations which is only tolerated due to their excellent credit record Blemish that record and IMO we will see big discounts to NAV open up

[hpcg] 27/9/2023 09:52

Dividend is OK but not screaming value compared with what is out there. Nor is it a terrible buy if one writes of the whole of LumiraDX. Tactically I also think this is less likely to get discount traction than other sectors, so one wouldn't want to buy too early.

[jonwig] 27/9/2023 08:11

H1 results:



98% of loans are floating rate. NAV up, dividend steady (7c pa). "Awaiting developments" at LumiraDX. No hint of provisions. (It's 11.3% of NAV.)

[boystown] 22/9/2023 12:33

Thanks both - I'll steer clear then

[williamcooper104] 22/9/2023 12:19

It's that and their current potential problem loan just highlights what the weakness here is - huge concentration risk Their underwriting track record is excellent but one mistake is all it will take to de-rate the share price (albeit some of that's in the current sp)

[jonwig] 22/9/2023 12:05

Boystown - debt is all secured on assets. These could be tangible, or they could be patents, royalties, etc.

The reason it's 85c not 95c is, I think, entirely down to the LumiraDx loan, which is too opaque for me to comment. Worth noting that they haven't made provision in the published NAV for this.

[boystown] 22/9/2023 11:32

Do the people on here who know at least vaguely what they're talking about think BPCR's 8.3% yield is sustainable?

It's more debt-based stuff, but at least it's debt focussed in a different area to most.

If you look at the top yielding ITs, here;
hxxps://www.dividenddata.co.uk/investment-trust-dividend-yields.py?&sort=yield&order=1

- you soon see that most stuff is debt / property / infrastructure

Of those on the list, I already hold HFEL, DGI9, GABI, RMII, RECI, API, EBOX, BIPS, HDIV, but am looking for a new home for AXI proceeds - so was thinking about this one.

[speedsgh] 24/8/2023 10:39

As at the 31 July 2023 the unaudited net asset value per Ordinary Share, including current period revenue, was 103.19 cents. The Company's factsheet will be located on the Company's website, hxxp://bpcruk.com.

[speedsgh] 18/8/2023 13:28

Good news for BioPharma Credit as Biogen swoops on Reata -

BioPharma Credit (BPCR), the specialist debt fund struggling with concerns over one of its big loans, is in line for a payday after US biotech company Biogen announced the acquisition of portfolio holding Reata Pharmaceuticals, which could net the investment trust returns of more than 70%, analysts estimate.

In May, the £851m trust agreed a $137.5m senior secured loan to Reata over up to four payments; $62.5m has already been funded. BPCR will be recompensated for that sum, as well as fees for early prepayment.

In an announcement on 31 July, the trust estimated the early repayment fees of 3% would total $15.5m if the transaction closed at the end of September, a sum that is likely to be higher given the trust anticipates completion in the following quarter, when it will have incurred more interest.

The shares rose 1% to 0.85 cents on Monday as investors leapt at the first bit of good news since May, when the dollar-denominated trust flagged its second-largest investment, LumiraDx, which accounts for 12.8% of assets, as a problem loan.

The shares had fallen 13% since their 0.97-cent peak this year in mid-May to 0.84 cents, representing a 14.6% discount to net asset value (NAV).

JP Morgan Cazenove analyst Chris Brown estimated the gross uplift from prepayment fees and make-whole fees would add 0.8% to NAV after performance charges, based on the calculation that BPCR is likely to exceed the 6% hurdle given high interest rates.

He added that the 16.9% discount to NAV at the end of last week was larger than the LumiraDx loans, reflecting that investors have priced in the worst, being a LumiraDx default.

Floating rate loans, whose coupons have risen with interest rate rises, make up 98% of the portfolio, setting the trust on track for another special dividend, which it has paid out every year since launch in 2017.

Maintaining an ‘overweight’ recommendation, he said: ‘Today’s announcement is a helpful piece of positive news for BPCR and a reminder of the attractive returns on offer, including the strong prepayment protections written into all the loans.’

Numis analyst Ewan Lovett-Turner said the positive news demonstrated BPCR’s approach, where the underlying assets it lends to have value to strategic buyers, and flagged the significant early prepayment fees it earns in the event of an acquisition.

[davebowler] 04/8/2023 18:23

htTPs://quoteddata.com/2023/07/biopharma-loan-repaid-reata-bid/?amp=1

[davebowler] 31/7/2023 15:54

RNS Number : 8476G

BioPharma Credit PLC

21 July 2023


BIOPHARMA CREDIT PLC (the 'Company')

As at the 30 June 2023 the unaudited net asset value per Ordinary Share, including current
period revenue, was 101.78 cents. The Company's factsheet will be located on the Company's
website, hxxp://bpcruk.com.

[jonwig] 31/7/2023 07:23

Takeover triggers another make-whole payment (could be ca. $15.5mn) -



Incidentally, latest NAV is 101.78c, barely changed all year. So they haven't seen fit to write down the Lunira loan.

[williamcooper104] 22/7/2023 11:46

Sounds like preparing for C11 As they're the only lender they don't need DIP protection, as doesn't matter if new funding is super senior, thus they've injected extra cash outside of C11 Looking like that old credit principle of when a loan is the banks and not the borrowers problem

[pjmurf] 22/7/2023 09:53

The market understandably not liking that update. Maintaining Lumira as a going concern makes sense to me tho, there will be increased income if they restructure and survive as a company or surely it's better to be sold as a going concern rather than broken up as per the article above.