Woodford Equity Income will pony up £12.5m for one of its less liquid holdings Rutherford Health as Neil Woodford tries to re-position his portfolio toward more large-cap names.
Woodford will add over 7 million ordinary shares in the Welsh proton beam therapy company to his fund when they are issued on Monday, a RNS announcement from Rutherford confirmed. He will buy the Rutherford shares at 176p, a discounted price to what they fetch on junior exchange Nex where they are trading at 227.5p.
The fundraising forms part of a pre-existing arrangement entered into by Woodford Investment Management and Rutherford when it floated on Nex in February.
Woodford promised the company £80m and has so far paid £35m, not including the latest fundraising. This means Rutherford can demand another £32.5m in funding from Woodford before the end of August next year.
The proton beam therapy business has hit him up for cash twice this year, first for £10m in May and again for £25m in mid-June, a week after the suspension of his equity income fund.
Both cash injections were provided by Woodford’s Patient Capital Trust, which now counts Rutherford, formerly known as Proton Partners, as its largest holding, representing 15% or £104m of its total net asset value.
Last week Woodford Patient Capital Trust struck a deal with lender Northern Trust to be able exceed its borrowing base on the condition of higher borrowing costs and tighter lending conditions. The new and more expensive loan agreement prevents him from making drawdowns except for pre-agreed deals. Woodford must also seek Northern Trust’s permission before making any new investments.
The pre-agreed commitment with Rutherford has proved a major headache for Woodford who has been trying to tilt his portfolio toward more liquid stocks in the FTSE 100 and FTSE 250 to shore up liquidity so that his frozen fund can re-open come Christmas. Only £300m worth of Rutherford shares or 155 shares have traded on the Nex since it floated last February.
Commenting on the latest Rutherford fundraising a Woodford Investment Management spokesperson said: “We continue to reposition the portfolio of the LF Woodford Equity Income Fund away from less liquid securities, into more liquid FTSE 100 and FTSE 250 stocks.
“In relation to Rutherford Health, formerly known as Proton Partners and which is listed on the NEX Exchange, we have agreed to a further equity injection of £12.5m to be made by the Equity Income Fund, following consultation with Link.
“This action has been taken in accordance with a pre-agreed commitment to the company, and to protect investors’ interests.”
