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S&P Prepares to Downgrade Avanti Bonds - warns Avanti seeking more debt

By Tom Winnifrith, The Sheriff of AIM | Monday 29 February 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.

On Friday Credit Ratings Agency Standard & Poor's stuck the knife into Avanti Communications (AVN) with an alert which should cause all shareholders to run to the hills. Avanti's sole response: to announce a meaningless Turkish contract. S&P is damning. It writes:

U.K.-based fixed-satellite services provider Avanti Communications Group PLC has shown slower improvements to capacity utilization, weaker EBITDA growth, and weaker cash flow generation than we had expected.

We now anticipate that Avanti will have only a limited liquidity buffer in calendar-year 2017 due to its high cash interest burden and heavy investment program. We understand that Avanti is currently negotiating additional credit facilities with multiple financiers.

We are therefore placing our 'B-' long-term corporate credit rating on Avanti and 'B' issue rating on its senior secured debt on CreditWatch with negative implications.

The CreditWatch placement signifies that we could lower the ratings on Avanti if it is not able to secure meaningful additional liquidity sources within the next three months or if we were to believe that the company is not on track to deliver significant EBITDA improvement.


So Avanti is trying to raise even more debt despite claiming that it had no need to Uh oh....

And for the record a B- rating which is what Avanti is at now is really not very good. Over to S&P:

B An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default.

C An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.


Right now Avanti is at B and B MINUS. Next stop is CCC. And if that is how the bonds are rated that tells you the equity is god damn fucking toast.

The shares are a sell - target price 0p

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  1. Drunken Sailor

    Moody’s had them at Caa1 stable in their last review.—PR_342766

    From the interims:

    “consent to draw down up to a further $71.0m in credit from multiple facilities. We do not expect to need to use this”

    It would seem they do expect to use it (If they can get it), less than a month after publishing the interims.

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