Drug company shares suspended after council appoints administrators over loan

Shares in a pharmaceutical company have been suspended from trading on the AIM market of the London Stock Exchange after Liverpool City Council appointed administrators over an unpaid £2m loan.

Redx, a drug discovery and development company, said it had received a formal demand for repayment of a loan that was made to a subsidiary, RedX Oncology Limited, by Liverpool in June 2012.

The terms of the loan were amended in March 2015 such that the maturity date of the Lloan was extended to 31 March 2017 (the ‘maturity date’).

Redx said interest at 12% per annum had also been accrued and fell due for repayment on the maturity date.

In an announcement to the AIM market, it said: “The company has been in discussions with [Liverpool City Council] regarding the repayment and/or restructuring of the terms of the loan (involving an initial payment and ongoing monthly payments), in order to reach an amicable settlement, but these discussions, despite considerable effort on the part of the board, have not been successfully concluded.

“The company has been actively seeking to negotiate directly with [the council] and also to secure alternative sources of finance in order to facilitate repayment of the loan at the earliest practicable opportunity. The company offered LCC an immediate payment of £1m in return for a short grace period in which to repay the outstanding amount. This offer was rejected.”

FRP Advisory LLP has been appointed administrators to the company and RedX Oncology. 

Iain Ross, recently appointed chairman of Redx, said: "The timing of this action by LCC and its advisers FRP is extremely unfortunate and quite baffling considering our efforts to have face to face discussions, including earlier today, the immediate offer of a payment plan and our latest proposal to make an immediate £1m payment in return for a short grace period.

“The Board and its advisers felt consistently confident that we could have found the appropriate solution within a short period and can't quite fathom why a creditor with whom we have had a good relationship for over 5 years is taking such an aggressive stance when they know, and have been provided with the evidence, that the company is making excellent progress on all fronts.”

Ross added: “The company, which now comprises 84 employees, has two incredibly important state of the art cancer programs, which will shortly commence clinical development in seriously ill patients and both these assets are attracting significant partnering interest from a number of large pharmaceutical companies. Despite this and our assurances to resolve the matter quickly, LCC has refused to meet with me or to have any direct discussion.

In a statement Liverpool said: "Despite the council agreeing to extend the repayment deadline by two years Redx, who have also relocated to Cheshire, have shown no willingness to make any repayment of any size during this period - despite it raising substantial funds from shareholders over the past few years.

"No contact was made by the company to Liverpool City Council in the run up to the maturity of the loan, on 31 March 2017, and the council was forced to make formal demand of the debt on the company."

The council said this demand was not satisfied leaving it with "no option" than to appoint administrators.

City Mayor Joe Anderson said: “This is a highly regrettable situation but Redx have been given more than two years to put their house in order and establish a way to repay this investment loan. Even at the 11th hour the city council was willing to work on a repayment schedule but it is now clear Redx has no intention to work with us in any meaningful way.

“This investment loan was given in good faith and we have a duty to the public to ensure their money, especially during such financial difficulties, is protected.”