Avanti Communications Group Placing New Ordinary Shares

 

Avanti Communications Group plc has completed a conditional placing (the “Placing”) of 16,279,070 new ordinary shares of 1p each in the capital of the Company (the “Placing Shares”) with existing and new institutional shareholders to raise a total of £70 million (before expenses). The Placing Shares represent approximately 23.7 per cent. of Avanti’s existing issued ordinary share capital.

The Placing has been carried out by Cenkos Securities plc (“Cenkos”) and Jefferies International Limited (“Jefferies”) (together “the Banks”) at a placing price of 430p per share.

The net proceeds from the Placing will help provide Avanti with funds in order to repay the fixed term facilities of a principal amount of £32 million (£53 million including accrued interest and an early repayment discount) borrowed in order to finance HYLAS 1, Avanti’s first satellite, and to enable Avanti to initiate the procurement of a third satellite. It will also provide additional resources for the Company to re-domicile the HYLAS 2 assets offshore.

The Placing is conditional, amongst other things, upon the passing of certain resolutions of the Company to be proposed at a General Meeting to be held on 28 July 2010.

Background to the Placing and use of proceeds

The principal rationale of the Placing is to enable Avanti to initiate the purchase of its third satellite, HYLAS 3 in order to take advantage of possible new business development opportunities. Avanti is currently implementing an attractive and relatively low cost strategy to begin the procurement with a relatively small cost commitment with the aim of negotiating sufficient customer commitments to support long term financing. It also intends to redomicile the HYLAS 2 assets offshore in order to better manage its long term operations closer to its anticipated customers and core gateway infrastructure, whilst also availing itself of efficient tax planning opportunities which will generate significant long term savings. In order to pursue these two strategically important developments, it is first necessary for Avanti to repay the credit facilities of a principal amount of £32 million originally made available to bridge finance the balance of HYLAS 1 construction costs (the “HYLAS 1 Facility”), which is the primary use of funds from the transaction.

The HYLAS 1 Facility was drawn down in July 2007 and is due for repayment in 2014. The Board now believes there are strategic reasons as to why the Company would benefit from an early repayment of the HYLAS 1 Facility.

This has been negotiated at an attractive early repayment price, representing a 10% discount to the aggregate amount that could be repayable under the terms of the HYLAS 1 Facility Agreement. Given the general absence of commercial banks from the project lending market, the directors believe that an equity refinancing is the most sensible approach, and greatly enhances the strength of the balance sheet and the long term security of the Company.

During the next financial year, subject to prevailing market and trading conditions at the time, Avanti intends to make an application to the FSA for the Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the Ordinary Shares to be admitted to trading on the Main Market. The Company then intends to initiate a progressive dividend policy when profits are available.

Trading update

Trading has been satisfactory in the financial year ending 30 June 2010 and performance is in line with market expectations.

On 12 May Avanti announced that it expected HYLAS 1 to launch by the end of September. Although the satellite itself is expected to be ready on schedule, uncertainty surrounding the readiness of the new Soyuz launch pad in French Guyana has led to a scheduling risk in relation to a Soyuz launch vehicle. In order to minimise timetable slippage, Avanti is currently in discussions with Arianespace regarding the selection of the most appropriate launch window for use of an Ariane 5 launch vehicle instead. Arianespace has assured Avanti of its ability to launch the satellite at the earliest opportunity and has several launch slots potentially available. However, as the Ariane 5 would typically involve a two satellite launch, the final determination of a launch date will involve the detailed assessment of launch partners and consideration of their own satellite delivery schedules. The Board’s estimate is that there is a risk of schedule delay of up to six weeks from the proposed end September launch. Avanti will update the market as soon as the launch partner and the launch date are settled.

The HYLAS 2 satellite is on schedule for a launch in the first half of 2012. Following the recently announced contract wins in the institutional and enterprise market segments, and positive developments in the pipeline of potential new business, Avanti is confident that it will be able to sell HYLAS 2 capacity within the expected timetable.

Details of the Placing

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 1p each in the capital of the Company (“Ordinary Shares”), including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue.

The Placing will be made on a non-pre-emptive basis. The Placing would represent an increase of approximately 23.7 per cent. of the existing issued ordinary share capital of the Company, and the Placing Shares would represent approximately 19.2 per cent. of the enlarged issued ordinary share capital of the Company.

John Brackenbury and Nigel Fox, Directors of the Company, have agreed to subscribe for 8,000 and 1,163 Placing Shares respectively. Upon completion of the Placing John Brackenbury will be interested in 450,891 ordinary shares representing 0.5% of the enlarged issued share capital and Nigel Fox will be interested in 71,417 ordinary shares representing 0.1% of the enlarged issued share capital.

The Company will apply for admission of the Placing Shares to trading on AIM (“Admission”). It is expected that Admission will take place and that trading in the Placing Shares will commence on 29 July 2010.

The allotment and issue of the Placing Shares will be made by the Company to placees procured by the Banks (acting as agents for the Company). The Placing is conditional, amongst other things, upon the passing of certain resolutions of the Company to be proposed at a General Meeting to be held on 28 July 2010. Details of the Placing and the General Meeting are to be set out in a circular to be sent to shareholders of the Company on or about 12 July 2010. The Placing is also conditional upon, amongst other things, Admission becoming effective and on the Placing Agreement between the Company and the Banks not being terminated prior to Admission.