Avanti seeks noteholder support for refinancing, $130 million of cash

By Susanna Moon

Chicago, Dec. 20 – Avanti Communications Group plc is again soliciting consents to amend its senior secured notes due 2019, this time for a cash injection amid a “very poor” industry setting.

The proposed refinancing would “fully fund the company through the creation of $242 million of additional liquidity through $130 million of new cash funding and up to $112 million of potential interest deferrals up to April 2018 and allow the company significant working capital to launch Hylas 4 and grow into its capital structure,” according to a company announcement.

The refinancing comprises three distinct steps, which are contingent on each other: securing amendments to the notes; making a “new money offer”; and reorganizing the company’s board of directors.

Holders representing about 73% of Avanti’s senior secured notes due 2019 have agreed to fully underwrite the $130 million of new cash funding in the form of PIK toggle notes and to consent to amendments and waivers needed to implement the proposed refinancing.

The proposed amendments include setting up a $132.5 million super senior debt basket, to be used “in the near term to substantially reduce the company’s interest cost.”

Specifically, holders of 73% of the notes agreed to permit

• Up to about $112 million of potential interest deferral for the April 2017 and October 2017 PIK toggle note coupons and the April 2017, October 2017 and April 2018 amended existing notes;

• Incurrence of the $132.51 million PIK toggle notes; and

• Incurrence of up to $132.5 million of super senior debt to repay issued PIK toggle notes and to replace and cancel any unissued PIK toggle note commitments.

The consent solicitation and exchange offer to amend the notes, which are needed for the proposed refinancing, require the support of holders representing at least 90% principal amount of the notes.

If the consent bid fails to go through, the company said it plans to launch a scheme of arrangement under the English Companies Act 2006 to effect the proposed amendments and waivers to the existing notes indenture, which would require consent of a majority in number of holders representing at least 75% principal amount of the notes.

The company said it is allowing all of the noteholders on a pro rata basis to participate in and backstop the new cash funding of up to $130 million, which will

• Give them a pro rata share of 9.09% of the fully diluted share capital of the company; and

• Include the option to roll up $1,540 aggregate principal amount of existing notes into PIK toggle notes for every $1,000 of PIK toggle notes purchased.

New money offer

In the new money offer, the company is offering holders who submit consent in the solicitation the right to purchase super senior second-priority PIK toggle notes due 2021 with an aggregate principal amount of up to $132.5 million, which breaks down to $82.5 million of PIK toggle notes issued on the basis of $80 million funded with original issue discount of 3% and $50 million of PIK toggle notes to be issued on specified delayed draw dates – of up to $15 million on June 30, 2017 and up to $35 million on Nov. 30, 2017.

Proceeds would be used for working capital purposes and to pay upcoming capital expenditure and insurance obligations of the group.

The company would issue up to $82.5 million principal amount of the PIK notes on closing of the refinancing, with the remaining up to $50 million to be issued to holders on specified dates of June 30, 2017 for up to $15 million and on Nov. 30, 2017 for up to $35 million, subject to reduction for the incurrence of super senior debt and to conditions being satisfied on the drawdown dates, the release noted.

Holders who elect to purchase more than their pro rata share of PIK notes will be offered, along with the initial consenting creditors, the right to subscribe for their pro rata share of 14,739,600 new common shares, representing about 9.09% of the fully diluted share capital of the company, at par.

New money backstop creditors and the initial consenting creditors will also receive a commitment fee of 3% payable in cash on their pro rata share of the delayed-draw amount as well as a drawdown fee of 1.5% payable in cash on their pro rata share of the delayed-draw amount when issued.

The initial consenting creditors have agreed to fund up to the entire amount of the new money offer, subject to reduction based on other participants and the incurrence of super senior debt.

More details, background

Hylas 4 would be added to the company’s existing fleet. Under the contracts for the construction, Hylas 3 and Hylas 4 would require “significant levels of capital expenditure and investment.”

“The company is therefore proposing the refinancing transaction to preserve its cash liquidity in the short-term and provide significant sources of new capital to fund the business through the launch of Hylas 4 in Q1 or Q2 FY2018 and beyond,” the release said.

The company’s board of directors completed the strategic review that it began July 11, which included various financial and strategic options such as a merger with a third party, a sale of the business or new equity investment, the release said.

Avanti terminated the formal sale process on Tuesday after rejecting interest in writing from three strategic buyers and two private equity companies, including one formal indicative offer.

None of the offers reflected “the true value of Avanti,” the company concluded.

“The industry backdrop has been very poor, with valuations across the industry falling dramatically in 2016,” the company noted.

The company said it negotiated postponing some capital expenditures for the construction of Hylas 4 with $20 million due to Orbital Sciences Corp. deferred to Jan. 1 and $18.7 million due to Arianespace until Dec. 28 for $2 million and up to Feb. 28 for $16.7 million.

The company also obtained consents on Oct. 18 to allow in-kind interest due Oct. 1 in order to preserve $28 million net cash in the short-term.

Despite this, the company lacks the funding to build Hylas 4 and to meet some of its payment obligations.

“Securing the underwriting of core bond investors to launch this major refinancing gives us a high degree of confidence that it will complete in January,” Paul Walsh, the company’s chairman, said in the company press release.

“After a turbulent year for Avanti, it is important for us to focus all of our attention on delivering outstanding services to our customers and preparing for the launch of Hylas 4. This prized asset will more than double the revenue generating capacity of the fleet, bringing much needed extra capacity to mature markets in Western Europe and opening exciting new markets in West Africa. With the completion of coverage over EMEA it also makes Avanti the regional partner of choice of large multinational customers seeking a single service provider.”

The information and tabulation agent is D.F. King & Co., Inc. (avn@dfking.com, 888 644-5854 or 212 269-5550). PJT Partners (UK) LLP (Docekal@pjtpartners.com or +44 20 3650 1000) is the financial adviser to the initial consenting creditors.

Jefferies International Ltd. and Greenhill & Co. International LLP are the financial advisers.

Avanti Communications is a London-based provider of satellite communications in Europe, Africa and the Middle East.

© 2015 Prospect News.
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