S&P lowers Avanti Communications

S&P said it lowered the corporate credit rating on Avanti Communications Group plc to SD (selective default) from CC.

The agency also said it lowered the rating on Avanti's senior secured notes due 2019 to D from CC. The recovery rating is unchanged at 2.

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 toggle feature and subordinated position maturing in 2022/2023, S&P said, and $211 million of newly issued senior PIK toggle notes maturing in 2021/2022.

This transaction is considered tantamount to a selective default by the agency because S&P said it views the combination of amended notes and newly issued senior PIK toggle notes offered to be less than the original promise of the notes.

The transaction also includes $130 million of cash capital raised in addition to newly issued senior PIK toggle notes consisting of an $82 million note issuance at transaction close and $50 million on a delayed draw basis.

The refinancing also included an option to raise super senior debt to replace the issued PIK notes, S&P said.

Avanti is a small player in its industry and is still in the process of developing a limited fleet of satellites, the agency said.

Despite Avanti's relatively good contract backlog of $276 million as of Sept. 30, 2016, the company has recently seen lower-than-expected growth in revenues, which led to insufficient liquidity to meet its funding requirements through the second quarter of fiscal year 2017, S&P said.

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