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On Wednesday, investment firm Jefferies downgraded BioPharma Credit PLC (BPCR:LN), shifting its stance from Buy to Hold. The adjustment follows observations of significant loan repayment and prepayment actions within the first half of the year, potentially resulting in a substantial cash balance for the company.
The firm’s analyst noted that should BioPharma Credit not secure new investment opportunities, the company could end up with a cash balance that approximates 50% of its net asset value (NAV). This scenario is anticipated due to the high level of loan repayment and prepayment activity noted over the period.
Moreover, with several loans approaching the end of their make-whole periods, there is an increased possibility of additional cash drag. This situation is a key factor influencing the decision to downgrade the stock. The make-whole period is a timeframe during which a borrower must pay a penalty if they repay a loan before its set maturity date.
The potential for a larger cash balance and the risk of further cash drag due to the expiry of make-whole periods have prompted Jefferies to take a more cautious view of BioPharma Credit’s stock. The firm’s new rating reflects concerns over the impact of these factors on the company’s financial performance.
Investors are now watching to see how BioPharma Credit will manage its cash position and whether the company will be able to mitigate the risks associated with the impending expiry of make-whole periods. The outcome of these developments will likely influence the future performance of the company’s stock.
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This story originally appeared on Investing
