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Avanti Communications - existing debt now yields 30%: that says shares toast

By Tom Winnifrith, The Sheriff of AIM | Friday 8 July 2016


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Yesterday Avanti Communications (AVN) issued a dire lack of profits warning. Having warned folks in a special 25 minute session at UK INvestor (HERE) that this one was heading for the knacker's yard, the bear community is vindicated. Our big call is looking good. But have you seen how the existing debt ( in which Avantis drowning) responded. It says the shares - down 60% to 24p yesterday - are near as damn it toast. The target here is 0p or very close to that.

The yield in the existing debt is now 30% as you can see below.

So in order to survive Avanti needs to raise $50 million of equity - that is more than its current market cap. Then it can tap into new debt, an Export Credit Line. But if the yield on existing debt is 30%+ what coupon will Avanti have to offer on the new debt?

I speculated yesterday that the placing might just be do-able at 16p if hapless Nomad and broker Cenkos twisted a few arms. One source reports to me that the placing price may be just 3.5p. Ouch and double ouch. Keep selling.


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