Avanti Communications proposes debt-for-equity swap

Avanti Communications, the satellite services provider, has reached agreement with its major shareholder and most of its bondholders to restructure its $557m debts via a debt-for-equity swap.

The proposed debt swap deal, for which a shareholder vote will be required, will hand hedge fund Solus Alternative Asset Management a 41.5% stake in AIM-listed Avanti, with Mast Capital and Tennenbaum Capital Partners taking further large clumps of the 2bn new shares such that the trio will hold 92.5% of the company's enlarged number of shares in issue.

Avanti, although existing equity investors would be left with a stake of just 7.5%, said the deal would substantially reduce its debt, decrease its future interest payments and "potentially raise new liquidity".

The debt being swapped would convert to roughly $150m of equity because of the steep discount at which the debt has been trading, Sky News reported, citing "city insiders", with Avanti's annual interest bill slashed to around $40m from near $170m at present.

Avanti, which is chaired by former Diageo boss Paul Walsh and led on an interim basis by Alan Harper after CEO David Williams jumped ship in August, said the agreement had been made with noteholders representing approximately 62% of its outstanding 2021-maturity bonds and 55% of its outstanding 2023 bonds, together with shareholders holding 34% of its current equity.

In order to approve the scheme, a majority in number of noteholders representing at least 75% in aggregate principal amount of the 2023 notes must vote in favour of the scheme.

Avanti will convene a general meeting for the vote on the debt for equity swap and to obtain the approval from a majority of independent shareholders on whether to waive the City regulatory requirement for Solus to make a takeover offer. A circular is expected to be published during the first quarter of 2018.

Avanti shares were up 8% to 6.9p on Wednesday, having slumped from above 200p at the beginning of 2016 amid ongoing concerns over servicing its debt pile, giving it a market cap of £10.6m.