Avanti Communications Share Discussion Threads

[sirlurkalot] 03/8/2007 10:08

And the transcript of the Sharecrazy Board Talk interview please?

[rapier686] 03/8/2007 09:49

Ok thanks I now understand the resolution.

Construction costs for #2-4 will need stand alone financing - as they will precede #1 delivering a service and so enabling refinancing.

Launch, insurance and probably ground infrastructure costs for #2-4 can be raised off #1's cashflow after refinance, be it by debt or prepayment.

[sirlurkalot] 03/8/2007 09:42

Rapier,

Remember we're thinking of the current debt being refinanced in about 2009, by which time there will hopefully be some progress on the second and third sats, so that refinanced facility would be secured on all (?)three of the sats by then in orbit or in some stage of construction, combined. It's only the current debt providers who want sat 1 to be ringfenced: once they are refinanced out of the picture the ringfencing of sat 1 needn't exist as it suits no-one else. As I see it the distinction between satellites 1 and 2/3 is something that only need exist in 2007 and 2008.

Where did you get the transcript of the Sharecrazy Board Talk interview from please?

[rapier686] 03/8/2007 09:17

What you say on financing makes sense, but it appears to run against the Sharecrazy interview. Subsequent satellites need financing stand-alone.

Pertinent extracts :

18:15
JW: ... Leaving the equity with about £40m which is about £1.60 a share. So there is a hard floor to our share price, the worst thing that can possibly happen to me is the satellite blows up on launch. Very low risk of that happening, around 3%, but if that happens the shareholders get £1.60 back.

TW : If that happened would you try and build another satellite?

JW : In reality, yes that's exactly what we'd do and in fact by that point we expect to have another 3 satellites under construction anyway.

TW : So it would just delay the cashflows by perhaps 18 months?

JW : Exactly.

...

25:00
TW : You say you've got that spectrum, maybe I'm misunderstanding this, but doesn't that imply you have to launch a second and third satellite, I think you referred earlier to the fact you're going to put a pipeline of them. Should I be assuming that by 2012 you might have, say, 3 satellites in space?

JW : I hope to have 4 satellites in space by 2012, because that's what I think the demand will justify for us at minimium. The new spectrum that we've got will involve new orbital locations, so my first satellite HYLAS, will occupy a piece of space over the Atlantic ocean, the new satellites will occupy a piece of space above the Indian ocean. However, before we attempt to finance those satellites we're first going to attempt to get customer commitments. I want to have either presales or joint venture partnerships which bring cash in, or certainly the certainty of cash flow, that I can then take to the City and use to raise very efficient finance, predominantly debt finance.

TW : Well if you're saying it costs £80m to launch a satellite, that's £240m, I can do my back of the envelope calculations and work out how much free cashflow HYLAS is generating from 2009 but I still assume that you can't borrow completely against that, is there going to be dilutive equity fundraising sometime?

JW: No, let's be absolutely clear on this, I feel the pain of my shareprice at the moment, I think my shareprice is ludicrously mispriced. I obviously have a job of work to do to explain the nature and dynamics of the space industry to the investor market, it's not a market that many people know anything about. But the value of my licence and the value of having my first satellite going up there is simply not reflected in the shareprice at the moment. My current market capitalisation is less than the amount of cash that we had invested in our first satellite. So I clearly have some work to do to explain that. So under no circumstances am I going to do a dilutive equity issue at anything near this price, it's simply not in my interests to do. However it's possible to get certain types of customer to pre-commit to buy large amounts of bandwidth or to do a joint venture. So I will simply use other people's money to finance my next three satellites.

TW: So you feel from presales, plus the money you can borrow for cashflow generated by HYLAS, you should be able to largely fund the rollout.

JW: No, we wouldn't borrow money against the cashflows of HYLAS because the cashflows of HYLAS are secured for the current debt investors, so we'd be looking at financing these new satellites on a stand alone basis and therefore joint ventures or capacity presales are the best way to go. We've already got a number of those in fairly advanced stages of discussions so I'm reasonably confident that we're capable of doing those kinds of deals. So, if we're using other people's money to finance those projects then that's basically equity value I'm creating for my existing shareholders which should result in a pretty dramatic increase in share price. My own LTIP, and that of my colleagues, is based on us achieving a share price of £10, that's a pretty conservative estimate in my opinion, if I didn't think we could do £10, I wouldn't have agreed to it with my board, but that give you a rough feeling of where I think our share price can get to. And so I'm certainly not interested in giving away a lot of ownership in our company to finance other satellites.
28:42

[sirlurkalot] 03/8/2007 08:09

Rapier,

Obviously I don't know the precise terms of the yet to be finalised insurance, but AIUI it would cover partly faulty launches, ie the satellite only partly works when they get it up, in which case a fraction of the £80m is payable.

Yes, the £1.60 (I think it's £1.70 on slide 48, but whatever) wouldn't actually get paid back to shareholders so it's a bit of a meaningless figure, but no more meaningless than the cash figures of the "cash rich" lossmaking companies that were popular a few years ago.

I think the pre-selling of capacity to fund the next satellite is fairly straightforward. If one transponder on HYLAS were to sell at a rate of say £1m-£1.5m pa pt, that would be equivalent to ~£20m pt present value for the entire 15 years use. Obviously with a bit of bargaining on the price Avanti might agree say £18m for one transponder for 15y if paid in full now. There are 40 transponders, so if Avanti were to make half a dozen such forward sales of the first satellite's capacity they've raised ~£100m cash now to pay for the second satellite.


j,

My understanding is that HYLAS is thought of as a fairly small satellite, so later ones would be bigger with more capacity and functionality, but of course it's way too early to be getting into all that.

[jelignite] 02/8/2007 23:23

great, another question I would like to ask are the next sats going to be hybrids or clones, tech advances so quick nowadays, testing these babies is a long haul, 3 months of giggy giggy is a lot of giggy giggy?

[rapier686] 02/8/2007 22:43

Well any insurance terms are still subject to negotiation and contract, but I thought the intention was to purchase insurance which would also payout against operational failures early in orbit. And the expectation is that this sort of insurance will come with a £8-10m premium for £80m of cover.

P48 of the presentation:
'In the event of a "total loss" i.e. rocket blows up, insurance pays out immediately.
In the event of in orbit "partial loss" i.e. it works, but not perfectly, loss is assessed and negotiated'

However the £1.60 backing is a bit illusiary since they don't plan to return it to shareholders but build and launch a replacement satellite with it. Although Mr Williams anticipates having up to 3 satelites in construction by that point anyway - hopefully financed by JVs and presales. (source the sharecrazy interview)

[sirlurkalot] 02/8/2007 22:29

Hi j,

I think no insurance for system failure when in orbit, but they test the satellite to within an inch of its life before they put it up.

[jelignite] 02/8/2007 21:39

Hi

thanks for the info

worse case senario £1.60 share price insurance coverage with sat exploding, am I correct? this is on launch or as reading is there another insurance for system failure when in orbit?, what then the sp?

reading today, the number 2012 for satelite covereage in india, mid east: the olympics in the UK, what could be the data involved in gambling? MOD coverage? DOD coverage, I think all bases are covered in the sort term, long term has a number 2012 embosed again, is that the £7.55, time to sell just after the 100 meter race, and who's gonna win it?

Still tickles my captain Kirk!

Jelignite

Sry just musing

[jelignite] 02/8/2007 21:05

Thank you moving over to main thread

[sirlurkalot] 02/8/2007 20:26

OK Rapier, well spotted, that's the presentation that I've got. I won't send it out to anyone as it's available there, and I'll chuck everyone's email address. I don't think it was there earlier.

[rapier686] 02/8/2007 13:47

The presentation is now on the website along with the AIM admission document.

Both accessible from


I'm sure that page was blank when I looked this morning!

Thanks to SirL for drawing them to my attention.

[levr] 02/8/2007 11:01

Hi SirL,

Spotted your post on the Fool Pub this morning; AVN does sound appealing from a risk/reward perspective, lack of correlation with the rest of my portfolio, high barriers to entry and a strong sector. I need to evaluate the risks in detail though, so any further information appreciated.

[sirlurkalot] 02/8/2007 08:31

OK ARGY, got your address

[argy2] 02/8/2007 08:18

sirlurkalot

Thanks.

[sirlurkalot] 02/8/2007 08:10

OK b and h, got your email addresses, will send later

[hindsight] 02/8/2007 08:06

Hi SirLurkalot, I too would be very grateful to get a copy

Thanks in advance

[briggs1209] 02/8/2007 07:56

HI SirLurkalot, I would be very grateful to get a copy,
thanks

[sirlurkalot] 02/8/2007 07:53

I have the slides from the presentation. If anyone wants them post your email address on the main Avanti Comms thread

[sirlurkalot] 02/8/2007 07:40

OK d, I've got your email address so you can edit it off. I'll send out the slides at the end of the day or whenever it seems everyone interested has put up their email address.

The research note (755p target) is available here

[sirlurkalot] 02/8/2007 07:19

I have the pdf slides from the presentation, if anyone wants them post your email address here on this thread. File is 2.6MB.

[terryebby] 01/8/2007 19:01

uka share price taregt of £7.55 yesterday. treble yer money ? Ave it !