Just a few days after seeing its latest satellite launched into orbit, and only a few weeks following an announcement over financial restructuring, Avanti Communications says it may not be able to meet its debt obligations.
London-based Avanti, which supplies satellite capacity over Europe, the Mid-East and Africa, told shareholders on April 9th that unless they approve a debt-for-equity swap which would convert much of its outstanding borrowings into new equity in the business it would face being placed into administration.
If the debt-for-equity proposal is accepted then the position would see those bondholders (led by hedge fund Solar Funds) hold 42 per cent of the company’s share capital. Avanti also wants to alter the payment terms on the company’s remaining debt obligations. The company is seeking to convert $557 million of debt into equity. Even if approved the business would still hold $118 million of debt.
Avanti says it wants the new financial structure in place by the end of April. It says it would then want to borrow more cash (at least $50 million) as well as secure around $40 million of additional financing to see it able to pay creditors. It owes $40 million to satellite builder Orbital ATK.
“Shareholders should be aware that if the restructuring does not complete by 30 April 2018, the company will default on its bond interest payable under the existing bond indentures,” Avanti said.
“In the event that the company is unable to meet such obligations as a result of the failure of the restructuring to complete or the failure to raise sufficient additional funds, the directors would likely seek to place the company into some form of insolvency proceeding, or a creditor may take action to enforce or initiate an insolvency proceeding,” said Avanti.
The news did not go down well and its already depressed share price on the London Alternative Market fell a further 32 per cent in trading April 9th to 7 pence a share. The business now has a value of some £12 million.