Hexicon extends its current credit facility

Hexicon has announced that it has signed an agreement to extend its current credit facility of 75 MSEK until June 30, 2025. In our view, the terms of the extension appear reasonable at first glance and the extended credit facility allows Hexicon to focus on its planned divestments. However, given that the credit facility is only extended for six months and the structure of potential divestments remains uncertain, we cannot rule out the possibility of an equity issue in the next six months to secure at least mid-term financing. As a result, we are not making any immediate changes to our valuation or recommendation, but we will update our view on the company's valuation at the latest in connection with its Q4 report.

Hexicon’s current credit facility of 75 MSEK has been extended for six months and the lenders include Wallstreet Aktiebolag, part of the Wallenius Group, and a group of private financiers. The lender collective will receive a total of 40.4 million warrants with a strike price of 0.375 SEK per share. The warrants program has a 12-month term and would result in a maximum dilution of 10% if fully exercised. In the case of an eventual issuance of shares during the term of the warrants, it will be extended by 12 months, and the strike price will be adjusted to the lower of 0.375 SEK or the issued share price plus 20%. Additionally, Hexicon’s shares in Hexicon Korea Ltd. have been pledged as additional collateral.

Credit facility extension defers additional capital needs

Hexicon is currently in the process of divesting projects, and in our view, the extension of the credit facility allows the company to proceed with its planned divestments while also providing the flexibility to focus on securing long-term financing. We had anticipated that the company would address its short-term financing needs before the end of the year, with the main uncertainty being the structure of the financing. Our initial assessment is that the terms of the extended credit facility are reasonable. Although the lender collective will receive warrants, the strike price is significantly above the current share price, and the potential dilution, if fully exercised, is relatively low. We believe that an equity issue would have been an alternative financing option, but at the current valuation, it would be both costly and dilutive to shareholders. However, given the high cash burn, the six-month extension of the credit facility, and the uncertainties surrounding the structure of the potential divestments, we still cannot rule out the possibility of an equity issue within the next six months to secure at least medium-term financing.