Avid Bioservices Announces Occurrence of a Make-Whole Fundamental Change: What Does It Mean for Investors and the Biotech Industry?
Company’s Notice to Holders of 7.00% Convertible Senior Notes
On February 5, 2025, Avid Bioservices, Inc. (Avid), a leading biologics contract development and manufacturing organization (CDMO), disclosed a significant corporate event to the holders of its 7.00% Convertible Senior Notes due 2029 (the “Notes”). The Notice, issued pursuant to the Indenture between Avid and U.S. Bank Trust Company, National Association (“U.S. Bank”), stated that a Make-Whole Fundamental Change had taken place under the Indenture in connection with Avid’s upcoming merger.
Understanding the Make-Whole Fundamental Change
According to the Indenture, a Make-Whole Fundamental Change occurs when a corporation undergoes a fundamental change, such as a merger or acquisition, that results in a change in the outstanding indebtedness of the issuer or a change in the terms of the securities being issued. In this instance, Avid’s merger with Space Finco, Inc. and Space Mergerco, Inc. (collectively, “Space Mergerco”) constituted such a change.
Impact on Avid’s Noteholders
The Make-Whole Fundamental Change provision in the Indenture allows the Company to call the Notes for redemption and pay holders the “Make-Whole Amount,” which is calculated as the principal amount of the Notes, plus the accrued and unpaid interest, plus a Make-Whole Premium. The Premium is a payment designed to compensate Noteholders for the loss of the conversion feature due to the merger. The exact amount of the Premium will be determined based on market conditions at the time of the redemption.
Global Implications of Avid’s Merger
The biotech industry is closely watching Avid’s merger and its impact on the convertible note market. This development could potentially set a precedent for other biotech companies planning mergers or acquisitions with significant debt obligations. If the trend continues, it may lead to increased redemptions of convertible notes in the industry, which could have implications for both issuers and investors.
Conclusion
Avid Bioservices’ announcement of a Make-Whole Fundamental Change in connection with its upcoming merger is an important development for the biotech industry. The event could lead to increased redemptions of convertible notes in the sector, potentially setting a precedent for other companies undergoing similar transactions. Noteholders of Avid’s 7.00% Convertible Senior Notes due 2029 will receive the Make-Whole Amount, which includes the principal amount, accrued and unpaid interest, and a Premium calculated based on market conditions at the time of redemption. The exact impact on the global biotech industry remains to be seen, but investors and industry observers will be closely monitoring this trend.
- Avid Bioservices announces Make-Whole Fundamental Change in connection with its merger.
- This event allows the Company to call the Notes for redemption and pay holders the Make-Whole Amount.
- The global biotech industry could see increased redemptions of convertible notes due to this development.
