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Avanti: Administration next step?

July 8th, was another sour day for Avanti Communications. Its already depressed share price (which had fallen 60 per cent on July 7th to 28p) fell another 16 per cent and at one point hit just 20p during the day. The collapse comes following a profits and trading warning from the company.

It seems some shareholders are upset that in its previous trading statement of May 16th it made no mention of troubles ahead, saying simply: “Full year guidance re-affirmed and underpinned by strong contract win momentum… Market demand for High Throughput Ka band satellite capacity across EMEA is strong… The medium-term outlook is positive, with in-service capacity due to increase by more than threefold before the end of the next financial year.”

Now, barely eight weeks later, that optimism has evaporated.

Avanti provides Ka-band satellite broadband capacity to a number of international clients, mostly in Africa and where currency pressures locally mean that some existing Avanti contracts with local ISPs have had to be renegotiated downward.

It says it is in the final stages of negotiating an unnamed export credit agency facility (nor does Avanti say for how much) and in order to secure the loan it needs to raise “at least” $50 million in fresh equity. The cash needs to be in place by this autumn.

Avanti says its Board has also identified cost savings in operational and capital expenditure which could save $58 million over a 3-year period.

Some sources suggest that Avanti has already begun selling off assets, and one report suggests they might have sold a pair of ground teleports in Africa.

Avanti is burning through cash at an impressive rate. At March 31st this year, it had $122.4 million of cash in hand. This had diminished to $57 million at June 31st. No doubt some of that cash went on the usual stage payments for the building of its 4th satellite (Hylas-4) being built by Orbital ATK and due for launch early in 2017.

CEO David Williams continues to do well despite Avanti’s losses. In 2015, he earned (salary, bonus and ‘other benefits’ a total of $1.15 million (up from $1.04m in 2014). Overall the directors (executive and non-exec) received $4.04 million in compensation. All of the executive directors received bonus payments, in total amounting to $269,338.

By way of comparison, Eutelsat’s CEO Rodolphe Belmer (revenues €1.47 billion, EBITDA profit €1.13bn) is receiving annual remuneration of €650,000 (plus eligibility to an “up to” 100 per cent of salary if key performance indicators are achieved).


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