What is the potential impact on PepGen's credit facilities or covenants if the lawsuit proceeds to a judgment?

Potential impact on PepGen’s credit facilities / covenants

If the securities‑class action moves from investigation to a judgment, the most immediate risk for PepGen is a material adverse‑event (MAE) trigger in its existing credit agreements. Most revolving credit and term‑loan facilities contain covenants that require the borrower to remain “non‑default” on any material legal proceeding and to keep a minimum net‑worth or leverage ratio. A judgment—especially one that includes a sizable monetary award or an injunction—could force PepGen to breach these ratios, automatically placing the company in default under the loan documents. In that scenario lenders would be entitled to accelerate the facility, demand immediate repayment, or impose higher interest spreads and tighter reporting covenants to protect their exposure.

From a market‑wide perspective, the prospect of a covenant breach would likely tighten PepGen’s liquidity profile, prompting a re‑rating downgrade from credit agencies and a widening of the company’s credit‑default‑swap (CDS) spreads. The added credit‑risk premium would pressure the stock lower, as investors price‑in the probability of a forced asset‑sale or a distressed‑sale of non‑core assets to satisfy debt obligations. Technical charts already show the stock hovering near a key support level around $1.20, with a descending‑triangle pattern that historically precedes a breakout on heightened volatility. A judgment‑driven covenant breach would be a catalyst for a downward breakout, likely breaching the $1.15–$1.10 range.

Actionable trading insight

• Short‑position: If you are comfortable with risk, consider a short or buying put options with a strike near the current market price (e.g., $1.30) and an expiration that captures the next earnings window (≈ 3–4 months). The upside is limited to the premium paid, while the downside is protected if the stock rallies on any positive news.
  
• Long‑position with a hedge: If you prefer a more defensive stance, a tight‑range trade—buying the stock near $1.20 support and simultaneously buying a protective put at $1.10—allows you to capture any bounce if the company manages to renegotiate its credit terms, while limiting loss if the judgment triggers a covenant breach.
  

Overall, the key driver is the likelihood of a covenant breach; monitor any court filings, lender statements, or credit‑agency updates for early signals. A judgment that materially damages PepGen’s balance sheet will quickly translate into tighter credit terms and a bearish price impact.