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Avanti suffers “default” downgrade

London-based satellite operator Avanti Communications has been downgraded by ratings agency Standard & Poor’s (S&P) following on from its exchange of debt (in the form of its Senior Secured Notes).

Earlier in January, Avanti organised a financial restructuring, which kicked in on January 26th.

S&P Global Ratings has now lowered its corporate credit rating on Avanti Communications Group plc to SD from CC and its senior secured notes due 2019 to D from CC.

According to S&P Global, the downgrade follows the close of Avanti’s distressed exchange for $708 million of its senior secured notes due 2019. Avanti offered a combination of $497 million amended notes with a payment-in-kind (PIK) toggle features and subordinated position maturing in 2022/2023, and $211 million of newly issued senior PIK toggle notes maturing in 2021/2022.

S&P, in effect, says it considers the transaction tantamount to a selective default because they view the combination of amended notes and newly issued senior PIK toggle notes offered to be less than the original promise and value of the original Notes.

Moody’s Investors Services has taken a more favourable view, despite acknowledging the “distressed” state of Avanti’s borrowings. Moody’s has “affirmed” its previous rating, but cautions, saying: “Given the tangible asset value in Avanti’s comparatively young, well-invested high-throughput satellite fleet and the fact that Avanti’s capital structure is dominated by its now $497 million of senior secured notes which contain no financial covenants, Moody’s deems the likely recovery rate for Avanti’s senior secured notes to be in the 35 per cent -65 per cent range in an event of default which remains consistent with a CFR of Ca and a Ca rating for those senior secured notes.”

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