Avanti Communications Share Discussion Threads

[dangersimpson2] 26/5/2016 11:18

Refinancing the debt at a lower interest rate is a great theory. The problem is that there is no way they would be able to refinance at a lower rate.

Last year when they issued 10% coupon bonds face value $125m for $115m cash which was a c.13% YTM. The bond market is currently pricing these at around 20% YTM. So if they did a refinancing today they would have to pay $128m pa interest vs the current $64m.

If they do manage to issue the proposed $71m extra debt then this would be subordinated to the 10% bonds that have first lien on the satellite assets so they would need to pay say 25% interest. This means another $18m pa interest and a total interest bill of $82m pa.

Given how tight their cash reserves are given committed capex on HYLAS 3/4 the only way they can reduce the risk of default on the bonds and therefore reduce the interest rate is by raising a lot more equity. Either via a placing or a debt for equity swap.

In my opinion the continues to be by far the best option for all stakeholders. If they reduced their debt from $640m to a more manageable $200m by converting $440m debt to equity + raised the $71m they need to complete capex at say 50p then they would be able to refinance the remaining $200m for less than 10% interest rate.

Then you would have a well financed company that could make the most of their technology and assets and grow into a successful & profitable enterprise.

The only downside would be existing shareholders would only have c.15% of the enlarged equity. Although there are ways to mitigate this like offering existing shareholders pre-emptive 7 for 1 rights at 50p with the raised cash going to the bond holders. Still 15% of a profitable, growing company is a lot better than 100% of nothing which is the risk the bonds are currently pricing.

[bwakem] 26/5/2016 11:06

bookbroker you must be joking about refinancing at a lower rate? Avanti's bonds are paying over 20% at the moment because that's the rate new bondholders are demanding to hold its debt. They don't have any hope of refinancing at a lower rate.

[hpcg] 26/5/2016 10:56

Paul Walsh is rich and retired. What happens to Avanti is imaterial to him or his lifestyle. Small director buys after bad results are a classic keep selling signal.

[bookbroker] 26/5/2016 10:48

Time Paul Walsh took a more active role here, he is a big hitter in the boardroom, and his reputation to a degree rests upon the success or failure of this co., action stations!

[sphere25] 26/5/2016 10:28

More new lows. Salvage what you can folks before it's too late. Noone has to believe anything from those with a negative bias. All you have to do is open your eyes and look at what the chart is telling you.

This gets booted out of one of the MSCI indices next week too so expect more selling pressure to come.

All imo

[seball] 25/5/2016 15:44

Excellent read. Just shows how good Avanti tech is compared to competition . Thanks

[weatherman] 25/5/2016 14:55

As posted on LSE.



Avanti Ka band is not subject to serious rain fade, unlike other technologies.

[sg31] 24/5/2016 09:58

Sematron

hxxp://www.zoominfo.com/c/Sematron-UK-Ltd/34472397

[seball] 24/5/2016 07:51

Sematron Trade Release
Avanti Communications Group plc (“Avanti” or “the Group”), a leading provider of satellite data communications services in Europe, the Middle East and Africa announces a new, long term contract with Sematron. Based in the United Kingdom (UK) and operating globally, Sematron is a content delivery company specialising in IP connectivity, video broadcast and distribution.

With access to dedicated capacity in a long term contract across the entire Avanti HYLAS fleet of satellites, Sematron will provide a major UK national broadcaster with high speed Ka-band satellite news gathering facilities, such as outside broadcast vehicles, across the entire country.

John O’Brien, Managing Director of Sematron, commented: “To support one of Britain’s biggest news organisations, we require a world class satellite service that provides agility, reliability and high quality. Using the Avanti satellite fleet, we can offer our customers a fully resilient solution that provides peace of mind as they operate across the UK. Only Avanti can deliver this.”

David Williams, Chief Executive Officer of Avanti, said: “It is a major breakthrough for Sematron and Ka-band satellite technology to become mainstream in outside broadcasting. We look forward to continuing this strong, long term working relationship.”

[accrillium] 22/5/2016 14:22

A new scathing report on the bulls fav site, which seems to reiterate the same elrico posted before avn had the post deleted.

hxxp://www.shareprophets.com/views/20934/avanti-communications-plc-circling-the-drain

[old thumper] 21/5/2016 05:04

"Avanti about to rise!"

Why??

Only cash flow will turn the flood.

AVN still hasn't done that BIG deal which the world notices.

[dangersimpson2] 20/5/2016 14:20

That only works for perpetual bonds. Where there is a maturity date you have to calculate the Yield to Maturity. If you buy the current Avanti bonds trading at 76.75 then you get a coupon of 5 every six months and 100 back (assuming no default) in 2019.

You can use a YTM calculator online to work out what this means for a yield and it comes to around 20%.

If Avanti issued fresh parri passu bonds today this is the rate at which they would need to pay. If they issued subordinated debt they would pay more. Logically their WACC should be higher still.

Read the last set of accounts. They may have issued $125m face bonds with a coupon of 10% but they only got $115m in cash for them. And the bond pricing has since slipped.

Surely whatever their position a sensible person would consider a DCF done at a 12% rate when the debt alone is trading at 20% as hopelessly optimistic?

[akajimmy9] 20/5/2016 14:05

use WACC for the firm and return on equity for the equity.

[rupert the bear] 20/5/2016 13:59

The correct discount rate should be the weighted average cost of capital. In AVN's case it should be obvious that that rate is well in excess of 12% and closer to 20% than 10%.

[extrader] 20/5/2016 13:52

Hi weatherman,

Point taken, re cash outlay impact.

But ask yourself : why would bondholders (sellers) want to sell and take a 50% capital hit/why would bondholders (buyers) only want to buy with an implied 20% yield a.k.a. 'reward for risk' ?

ATB

[weatherman] 20/5/2016 13:34

If a company is issued bonds at 100p and an interest rate of 10%, then those bonds go to 50p and an interest rate of 20%, the company pays out the same amount of interest, 10p per bond. Some of the shorters seem to overlook this fact.

[dangersimpson2] 20/5/2016 12:22

Unless Edison have addressed the issues from their last report then it is still fundamentally flawed.

- By using EBIT they missed the not insignificant debt interest from their near term DCF.

- All the value is in a terminal valuation which is a really bad way to model capital-intensive limited-lifespan assets.

- They use a c.12% discount rate when the debt has a YTM of c.20%!