NewSat
administrators
hopeful Jabiru-1
satellite project
can be saved
Administrators for
NewSat have told
CommsDay they are
hopeful of salvaging
something from the
company's
A$620 million Jabiru-1
satellite project,
noting that the
company had
“fantastic assets”
and
that the
satellite build was
well underway. PPB
Advisory has been
appointed voluntary
administrator
of the
troubled company,
while McGrathNicol
has been appointed
receiver following a
lengthy struggle
by NewSat
with its overseas
lenders.
As well as going
into voluntary
administration in
Australia, NewSat
has filed for
Chapter 15
bankruptcy
in the United
States. It was
granted a
restraining order
and a preliminary
injunction on a
temporary
basis
following an
application by PPB
Advisory.
PPB's practice
leader for
turnarounds Marcus
Ayres, one of the
administrators, told
CommsDay
that an immediate
priority would be to
hold talks with
satellite builder
Lockheed Martin,
launch provider
Arianespace and a
“plethora of
contractors” to try
to get the project
back on track. He
said that
while it was early
days, the
administrators
planned to start
intensive
negotiations with
all stakeholders
in the project.
According to Ayres,
the timeframe for
large turnarounds is
typically three to
four weeks, although
he noted that in the
case of NewSat it is
an “extremely
complicated”
project. However, he
noted that
the earlier the
project got back on
track, the better –
given the schedules
in place for
launching the
Jabiru-1 satellite.
Ayres nominated two
likely outcomes for
NewSat: either
the administrators
turn the project and
company
around and hand it
back to the
directors, or there
would
be a sell-off of the
company's assets.
However, he said it
was too early to say
which option was the
more likely.
In the meantime,
NewSat directors
have stepped aside
as Melbourne-based
receivers
McGrathNicol take
over
the day-to-day
running of the
company.
McGrathNicol
partner Jason
Preston said the
receivers' immediate
priority
was to take control
of the assets of
NewSat, assess its
financial position
and progress the
capital raising
activities
recently commenced
by the company. In
the interim,
the operations of
NewSat will continue
as per normal.
FINANCIAL WOES: The
Jabiru-1 project has
been beset
with financial
issues for some
considerable time.
In 2012
it went into a
trading halt for
three months while
it
sought to raise $105
million to secure
governmentbacked
export-import loans
from France and the
US.
That process pushed
back the launch
target date from
2014 to 2016.
NewSat eventually
gained a combined
US$390.1 million
of debt funding from
the US Export-Import
Bank
and France's
Compagnie Francaise
d'Assurance pour le
Commerce Exterieur.
However, its
troubles
started again last
year when it was
found to be in
breach of its
lending conditions
and at the same
time was called out
for various
corporate governance
issues.
The company again
went into a trading
halt at the end of
March this year
after failing to
come to
terms with lenders.
It had been working
to negotiate a
waiver with its
entire lending
group, but earlier
this month it
announced that
Coface would not
support that waiver.
The US Export-Import
Bank
then stated it would
not advance further
funds either, until
a substitute funding
source emerged that
was acceptable to
the other lenders.
The drawn out
funding issues
resulted in US
satellite
manufacturer
Lockheed Martin
issuing the
company a
termination notice
in January, in
relation to the
construction of the
Jabiru-1 satellite.
At
the time it had
overdue payments
totalling US$21
million. Newsat also
received
notification from
Arianespace, which
is due to launch the
satellite, that it
was reserving all
rights and remedies
with respect
to US$42.4 million
in outstanding
invoices.
Despite, the
termination notice,
Lockheed
Martin is believed
to have continued
with the satellite
build, which is
estimated
to be 70% complete.
In the case of
Arianespace,
the non-payment gave
rise to a
30 day cure period.
As a result, unless
payments
to Arianespace
recommence on or
before 3 May 2015,
Arianespace will
have
the right to
terminate the launch
agreement.
OTHER ASSETS: The
partially-built
Jabiru-1 project is
not the only asset
that
NewSat has. In
September last year
it
launched Jabiru-2, a
hosted payload that
provides 216MHz of
Ku-band capacity
onboard
Malaysia's MEASAT-3b
satellite.
That provides
coverage across
Australia,
Timor Leste, Papua
New Guinea and the
Solomon Islands. The
company also has
an agreement with
Cyprus-based A.P.
Kypros
Satellites that
allows it access to
eight
geostationary
orbital slots –
valuable commodities
in the satellite
world.
The other part of
the NewSat business
is its teleports in
Adelaide and Perth.
But those, too, have
been struggling over
the last 18 months.
In its results for
the first half of
FY15, NewSat
reported that
revenue was down to
$13.7 million, 17%
lower than income in
the first half of
the previous
financial
year. During the
first half of FY15,
the company incurred
a net loss of $39.7
million in
comparison to
a
$1.6 million net
loss during the
previous
corresponding
period. It also had
a negative operating
cash flow of $2.7
million, in
comparison to a
negative operating
cash flow of $1.6
million the previous
year.
NewSat said the
worsening
performance was
largely due to a
previously announced
wind back of
services provided by
a key partner to the
US government
following the
decrease of military
activity in
Afghanistan. It also
continues to face
challenging market
conditions and
weakness in economic
activity
in the military,
mining, oil and gas
industries.
NewSat's major
shareholder is Ching
Chiat Kwong, one of
Singapore's
wealthiest men. He
became
a
director of NewSat
in July 2013 and,
outside of the
export-import banks,
has been one of the
key
financiers of the
project. His
property company
Oxley Holdings is
best known in
Singapore for a
string of so-called
“shoebox apartments”
that created much of
his wealth.
Geoff Long,
Commsday
