The problem was recognized in July when Avanti Communications, a British satellite company, put itself up for sale as a result of a major financial crisis triggered by covenants on its borrowings.
Avanti was offered bids from several companies, but many of its US specialist bondholders, who control approximately a quarter of the shares, declined to accept offers because the result would have paid out only 80 per cent of the value of the debt. This was interpreted to be good news indeed, so the news made the cost per share go up 20 percent, translated to be 25£ ($30.69 US) at the closing bell.
Avanti, trying to bring in someone knowledgeable in challenging financial situations, appointed as a non-executive director Richard Mastoloni, a former JPMorgan banker and treasurer of Loral Space & Communications, which spent two years in Chapter 11 bankruptcy protection between 2003 and 2005. He was also on the board of Satélites Mexicanos when it entered Chapter 11 protection in 2011.
David Williams, chief executive of Avanti, not surprisingly, described the company’s financial problems and uncertainty around its future as “irritating”.
Avanti, in order to finance the launch of its HYLAS 4 satellite has produced $130M US of new funding while arranging deferment of $112M of interest payments so that they could hold the cash. The equity ownership of the company, controlled by the bondholders Solus Alternative Asset Management and Mast Capital Management, the Boston fund backed by KKR, will rise to 32.5 percent as a result of the refinancing.
This is not the first time that Avanti has done such, previously during a recent sale process in September Avanti bought itself time having issued $42.5m worth of bonds to avoid a potential debt-for-equity swap.
Avanti had reported revenue growth slower than anticipated, which had a secondary unintended effect on their working capital. Avanti issued both full-year results and a first-quarter trading statement alongside the refinancing package revealing revenues for the year to June dropped marginally to $82.8M while it recorded a $67M pre-tax loss, and the debt came in at $589M. The first-quarter trading statement showed revenues of $18M for a $5M loss. Avanti is dealing with the perception of being vulnerable to a bid even though they could have sold earlier this year.