TIDMAVN
RNS Number : 1589Z
Avanti Communications Group Plc
13 December 2017
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY
OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR
DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For immediate release
13 December 2017
Avanti Communications Group PLC
Announcement of Proposed Restructuring
Avanti Communications Group PLC (AIM: AVN), ("Avanti", the
"Company" and, together with its subsidiary undertakings, the
"Group") today announces that it has entered into an agreement (the
"Restructuring Agreement") with noteholders representing
approximately 62% of its outstanding 2021 Notes (as defined herein)
and 55% of its outstanding 2023 Notes (as defined herein)
(together, the "Majority Holders") and shareholders representing
34% of its existing issued share capital (the "Major Shareholders")
to implement a restructuring (the "Restructuring") of the Group's
indebtedness. The Restructuring, the material terms of which are
described below, would, if implemented, substantially reduce the
Company's outstanding indebtedness, decrease its future interest
expense and potentially raise new liquidity.
Summary of the Restructuring
Debt for equity swap for the 2023 Notes
In order to substantially reduce its outstanding indebtedness
and significantly decrease its future interest expense, the Company
will seek to implement an exchange (the "Debt for Equity Swap") of
all of its outstanding 12%/17.5% Senior Secured Notes due 2023 (the
"2023 Notes") for approximately 2 billion new ordinary shares of 1
pence each in the capital of the Company ("New Ordinary Shares"),
which will represent approximately 92.5% of the Company's issued
ordinary share capital following completion of the Debt for Equity
Swap (the "Enlarged Share Capital").
As of the date of this announcement, the Company has US$557
million in aggregate principal amount of 2023 Notes
outstanding.
It is proposed that the Debt for Equity Swap will be implemented
through a Court-approved scheme of arrangement pursuant to Part 26
of the Companies Act 2006 (the "Scheme").
In order to approve the Scheme, a majority in number of
noteholders representing at least 75% in aggregate principal amount
of the 2023 Notes held by those holders present in person, or by
proxy at a meeting of holders, must vote in favour of the
Scheme.
It is expected that, immediately following the Debt for Equity
Swap, Solus Alternative Asset Management LP ("Solus") would hold
approximately 41.5% of the Enlarged Share Capital. Accordingly, in
order to avoid Solus being required to make a general offer for the
existing issued share capital not already held by it, the Company
will seek the prior approval of the Takeover Panel and,
subsequently, the approval of independent shareholders at a general
meeting for a dispensation from Rule 9 of the City Code on
Takeovers and Mergers (the "Rule 9 Waiver").
Avanti will therefore convene a general meeting of its
shareholders (the "General Meeting") for the purposes of obtaining
the necessary approvals to, inter alia, allot the New Ordinary
Shares pursuant to the Debt for Equity Swap and to obtain the
approval from a majority of independent shareholders, on a poll, of
the Rule 9 Waiver.
It is expected that a circular containing, amongst other things,
further details of the Debt for Equity Swap, the Scheme and the
notice of the General Meeting will be published during the first
quarter of 2018.
Amendment of 2021 Notes
In addition to the proposed reduction in indebtedness and
interest expense resulting from the Debt for Equity Swap, the
Company will seek to further decrease its future interest expense,
improve its debt maturity profile and liquidity and eliminate
onerous financial covenants by amending certain terms of its
10%/15% Senior Secured Notes due 2021 (the "2021 Notes") in order
to:
-- extend the final maturity date of the 2021 Notes from 2021 to 2022;
-- permit the issuance of up to $30 million of additional 2021 Notes;
-- eliminate the Maintenance of Minimum Consolidated LTM EBITDA
covenant contained in the indenture governing the 2021 Notes;
-- change the interest rate payable on the 2021 Notes for all
remaining interest periods commencing 1 October 2017 from 10% cash
interest and 15% payment in kind ("PIK") interest to 9% cash
interest and 9% PIK interest;
-- eliminate the margin increase payable on the 2021 Notes if
the relevant Minimum Consolidated LTM EBITDA threshold was not met;
and
-- permit interest payments on the 2021 Notes to be paid as PIK
interest if Avanti does not have sufficient cash to satisfy the
applicable interest coupon,
(collectively, the "90% Proposed Amendments").
In order to implement the 90% Proposed Amendments, the Company
will seek consents from holders of the 2021 Notes to the 90%
Proposed Amendments pursuant to a consent solicitation (the "2021
Consent Solicitation"). Approval of the 90% Proposed Amendments
requires consent from holders representing at least 90% in
aggregate principal amount of the 2021 Notes (the "90% Requisite
Consents").
In the event that the 90% Requisite Consents are not received in
the 2021 Consent Solicitation, the Company will seek to implement
the 90% Proposed Amendments pursuant to the terms of a scheme of
arrangement. Implementation of the 90% Proposed Amendments pursuant
to a scheme of arrangement will be conditioned upon, among other
things, a majority in number of holders of 2021 Notes representing
at least 75% in aggregate principal amount of the 2021 Notes held
by those holders present in person or by proxy at a meeting of
holders voting in favour of the scheme of arrangement.
The implementation of each of the Debt for Equity Swap and the
90% Proposed Amendments will be conditional on the other.
Common Amendments and Waivers
Avanti will also concurrently commence consent solicitations
with respect to both the 2021 Notes and the 2023 Notes to amend and
waive certain standard events of default that might otherwise be
triggered by the Restructuring.
Summary of the Restructuring Agreement
The Restructuring Agreement sets out the terms and conditions
pursuant to which the Majority Holders and Majority Shareholders
have agreed with Avanti that they will take certain actions to
support the implementation of the Restructuring, including, among
other things, consenting to the 90% Proposed Amendments and the
Debt for Equity Swap, voting in favour of the Scheme, and approving
the Enlarged Share Capital and the Rule 9 Waiver.
In the Restructuring Agreement, the parties agree that if the
Takeover Panel determines that any provision of the agreement that
requires Avanti to take or not take any action, whether as a direct
obligation or as a condition to any other person's obligation
(however expressed), is not permitted by Rule 21.2 of the City Code
on Takeovers and Mergers, that provision shall have no effect and
shall be disregarded.
Potential capital raise
Following and contingent upon the adoption of the 90% Proposed
Amendments and the completion of the Debt for Equity Swap, the
Company may seek to raise circa $30 million of additional capital
in the New Year. This potential capital raise may take the form of
new equity and/or additional 2021 Notes. Should the Board decide to
proceed with such a capital raise it will update shareholders
accordingly.
Related Party Transactions
The entering into of the Restructuring Agreement with M&G
Securities Limited and Solus (together, the "Related Parties"), who
hold approximately 16.9% and 15.9%, respectively, of the Company's
existing issued ordinary share capital, constitutes a related party
transaction in respect of each of the Related Parties, pursuant to
Rule 13 of the AIM Rules for Companies (the "Related Party
Transactions"). The independent directors of Avanti (namely Paul
Walsh, Alan Harper, Nigel Fox, David Bestwick, Andy Green, Paul
Johnson, Richard Mastoloni and Chris McLaughlin) consider, having
consulted with Cenkos Securities plc ("Cenkos"), the Company's
nominated adviser, that the terms of the Related Party Transactions
are fair and reasonable insofar as the Company's shareholders are
concerned.
Positive outcome for the Group and its shareholders
The directors of Avanti believe that the Restructuring, if
implemented, will help to create a sustainable long-term capital
structure and is in the best interest of all those with an economic
interest in the Group. Consummation of the Debt for Equity Swap
pursuant to the Scheme would result in the capitalisation of US$557
million in aggregate principal amount of 2023 Notes and
approximately US$81 million in interest expense savings per year.
Adoption of the 90% Proposed Amendments, either pursuant to the 90%
Consent Solicitation or, if applicable, a scheme of arrangement,
would result in interest expense savings of approximately
US$11million per year, as a result of the elimination of the margin
increase and assuming the Company pays interest at 9% on the 2021
Notes for all remaining interest periods.
It should be noted that the proposals set out in this
announcement are subject to various conditions, including the
agreement of definitive legal documentation. There is, therefore,
no certainty that such definitive legal documentation will be
agreed or that the Debt for Equity Swap and the 90% Proposed
Amendments will proceed. If the Restructuring is not successful,
then based on the projected cash flows of the Group or without
generating additional cash flow from operations in the near to
medium term, the Company could at some point in the future become
unlikely to pay its debt obligations under the 2021 Notes and 2023
Notes as and when they fall due for payment. Should this occur, the
existing equity may have little or no value.
The person responsible for arranging the release of this
announcement on behalf of the Company is Patrick Willcocks, Company
Secretary and General Counsel.
Enquiries
Avanti Nigel Fox, Patrick Willcocks
Tel: +44 20 7749 1600
------------------ -----------------------------
Cenkos Securities Max Hartley, Mark Connelly,
(Nomad) Nicholas Wells
Tel: +44 207 397 8900
------------------ -----------------------------
Montfort Nick Miles, Tel: +44 7973
130669
James Olley, Tel: +44 7974
982302
------------------ -----------------------------
Important Notices
This announcement may contain forward-looking statements
regarding future events or the future financial performance of
Avanti. You can identify forward looking statements by terms such
as "expect", "believe", "estimate", "anticipate", "intend", "will",
"could", "may", or "might", the negative of such terms or other
similar expressions. These forward-looking statements include
matters that are not historical facts and statements regarding
Avanti's intentions, beliefs or current expectations concerning,
among other things, the expected outcome of the Restructuring. By
their nature, forward-looking statements involve risks and
uncertainties, because they relate to events and depend on
circumstances that may or may not occur in the future. Avanti
cautions you that forward-looking statements are not guarantees of
future performance and that Avanti's actual results may differ
materially from those described in or suggested by the
forward-looking statements contained in this announcement. In
addition, even if Avanti's results are consistent with the
forward-looking statements contained in this announcement, those
results or developments may not be indicative of results or
developments in future periods. Avanti does not intend to update
these statements to reflect events and circumstances occurring
after the date hereof or to reflect the occurrence of unanticipated
events. Many factors could cause the actual results to differ
materially from those contained in forward-looking statements of
Avanti, including, among others, general economic conditions, the
competitive environment and the many other risks specifically
related to Avanti and its operations, including those discussed in
this announcement.
This announcement is for information purposes only and is not
intended to, and does not, constitute or form part of any offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of, any
securities whether pursuant to this announcement or otherwise. The
terms of each of the Debt for Equity Swap, the 90% Consent
Solicitation and the Majority Consent Solicitations, if commenced,
will be contained in the relevant offering and related documents
and will be distributed to holders in accordance with the terms
therein.
The distribution of this announcement in jurisdictions outside
the United Kingdom may be restricted by law and therefore persons
into whose possession this announcement comes should inform
themselves about, and observe such restrictions. Any failure to
comply with the restrictions may constitute a violation of the
securities law of any such jurisdiction.
In particular, this announcement is not an offer of securities
for sale in the United States. Securities may not be offered or
sold in the United States absent registration or an exemption from
registration under the United States Securities Act of 1933. Any
securities mentioned herein have not been and will not be
registered under the United States Securities Act of 1933, and no
public offering will be made in the United States.
Unless otherwise stated, no statement in this announcement is
intended to be a profit forecast or estimate and no statement in
this announcement should be interpreted to mean that earnings per
share of the Company for the current or future financial years
would necessarily match or exceed the historical published earnings
per share of the Company.
Cenkos is authorised and regulated by the Financial Conduct
Authority in the United Kingdom and is acting exclusively for the
Company and no one else in connection with the Related Party
Transactions, and Cenkos will not be responsible to anyone other
than the Company for providing the protections afforded to its
clients or for providing advice in relation to the Related Party
Transactions or any other matters referred to in this
announcement.
News type:
RNS
Date: 13 December 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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