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Mesoblast Limited Announces Debt Repayment and New Credit Facility

Overview of Mesoblast Limited

Mesoblast Limited (ASX: MSB; Nasdaq: MESO) is a recognized global leader in the field of allogeneic cellular medicines, specifically targeting inflammatory diseases. Recently, the company has made significant financial strides by paying off its existing senior secured loan from Oaktree Capital Management and partially repaying the subordinated royalty facility with NovaQuest Capital Management LLC.

Details of Financial Transactions

To accomplish these goals, Mesoblast secured a new credit facility amounting to $75 million. This funding comes from Dr. Gregory George, a current shareholder and director of Mesoblast. The terms surrounding this new facility are noteworthy; a second tranche of up to $50 million is also available at Mesoblast’s discretion until June 30, 2026. These financial maneuvers position Mesoblast to further enhance its mission of developing allogeneic cellular medicines—described as "off-the-shelf" therapies aimed at treating severe and life-threatening inflammatory conditions. The company’s innovative therapies are designed to counter severe inflammation through the release of anti-inflammatory factors, effectively modulating the immune system to mitigate damaging inflammatory processes.

Key Features of the New Credit Line

The newly established credit line comes with a fixed interest rate of 8.00% per annum, a marked decrease compared to Mesoblast’s previous debt structures. Notably, it also includes a five-year interest-only period that provides considerable financial breathing room. The initial amount of $75 million remains unsecured until the outstanding NovaQuest debt is settled, which must occur no later than July 8, 2026. Following this, the entire credit facility, which can go up to $125 million, will be secured solely by the Temcell royalty.

Dr. George’s compensation for this arrangement includes five-year warrants to acquire approximately 323,000 American Depositary Shares (ADSs) at $21.51 per ADS, which represents a 15% premium to the current 30-day volume-weighted average price (VWAP), contingent on shareholder approval.

Financial Benefits of the New Facility

According to Mesoblast, this new credit arrangement offers a substantially lower overall cost than previous financial commitments. Importantly, it can be repaid at any time without incurring early prepayment or make-whole fees, and it also avoids exit fees. Crucially, the facility does not encumber any of Mesoblast’s material assets or intellectual property. This means that the company retains the flexibility to pursue additional unsecured debt or enter into licensing agreements without facing constraints.

Strategic Implications

Dr. Silviu Itescu, Chief Executive of Mesoblast, expressed sincere gratitude for the backing from the company’s largest shareholder, highlighting that this was the most commercially advantageous facility following a competitive evaluation process. He noted that this facility significantly reduces the company’s cost of capital, while also freeing up major assets. Consequently, this provides Mesoblast with total flexibility for potential strategic partnerships and commercialization efforts.

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Through these financial developments, Mesoblast is poised to advance its mission in healthcare while effectively managing its financial commitments.

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