TIDMAVN
RNS Number : 1980K
Avanti Communications Group Plc
09 April 2018
THIS ANNOUNCEMENT (INCLUDING THE APPIX) 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 THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE
REPUBLIC OF SOUTH AFRICA.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN AVANTI COMMUNICATIONS GROUP PLC OR
ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR
THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED
ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF AVANTI
COMMUNICATIONS GROUP PLC.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (596/2014/EU). UPON THE PUBLICATION
OF THIS ANNOUNCEMENT. THIS INSIDE INFORMATION IS NOW CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
9 April 2018
Avanti Communications Group plc
Proposed Restructuring of the Group's Indebtedness
Proposed waiver of obligations under Rule 9 of the City Code on
Takeovers and Mergers
Proposed Open Offer and Notice of General Meeting
Avanti Communications Group PLC (AIM: AVN), ("Avanti", the
"Company" and, together with its subsidiary undertakings, the
"Group") announces that it will today post to shareholders a
circular (the "Circular") in connection with a proposed
restructuring of the Group's indebtedness (the "Restructuring"), a
proposed waiver of obligations under Rule 9 of the City Code on
Takeovers and Mergers ("Rule 9 Waiver") and proposed Open Offer,
including a notice of a General Meeting to be held at The Bridewell
Suite, Crowne Plaza London - The City, 19 New Bridge Street, London
EC4V 6DB at 10.00 a.m. on 25 April 2018.
Key highlights
-- a Debt for Equity Swap pursuant to the Scheme approved by the
High Court of Justice in England and Wales of all of the
outstanding 2023 Notes for 92.5 per cent. of the Company's enlarged
share capital following the issuance of the Exchange Shares (but
for the avoidance of doubt before the issuance of the Open Offer
Shares);
-- an offer for subscription by existing shareholders pursuant
to an Open Offer for up to GBP4.33 million;
-- the amendment of certain terms of the 2021 Notes pursuant to
the 2021 Notes Consent Solicitation;
-- the amendment and waiver of certain standard events of
default in the 2021 Notes Indenture and the 2023 Notes Indenture
that might otherwise be triggered by the Restructuring; and
-- the amendment to the submission to jurisdiction provision of
the 2023 Notes Indenture to require that, from and after the date
of effectiveness of the amendment, each party to the 2023 Notes
Indenture irrevocably submits to the jurisdiction of the High Court
of England and Wales until the Restructuring Agreement is either
terminated or is no longer in effect.
If the Debt for Equity Swap and the Open Offer are completed,
the Solus Funds will hold in aggregate up to a maximum of 42.0 per
cent. of the Enlarged Share Capital (assuming that the Solus Funds
subscribe for their full Open Offer Entitlement and that no other
Shareholders subscribe for Open Offer Shares). The Restructuring is
conditional, inter alia, upon the granting of a waiver by the Panel
on Takeovers and Mergers, and also upon the approval by the
Independent Shareholders of that waiver on a poll at a general
meeting, in respect of the obligation to make a general offer
pursuant to Rule 9 of the Takeover Code that would otherwise fall
upon Solus as a result of the issue and allotment to the Solus
Funds of new Ordinary Shares pursuant to the Debt for Equity Swap
and (where relevant) the Open Offer. The Restructuring and the Open
Offer are conditional upon, amongst other things, the Company
obtaining approval from its Shareholders to disapply statutory
pre-emption rights and to grant the Board authority to allot
Ordinary Shares in connection with the Debt for Equity Swap and the
proposed Open Offer and upon the Independent Shareholders approving
the waiver of Rule 9 of the Takeover Code.
What this means for Shareholders
The detail of the Proposals, described as a "restructuring" and
the "open offer" are complex and have been the subject of extensive
negotiations between the Company and certain of its Shareholders
and Note Holders.
As at 31 December 2017, the Company had US$118.0 million of
indebtedness maturing in 2020, US$323.3 million of indebtedness
maturing in 2021 and US$557.0 million of indebtedness maturing in
2023. In addition, the Company has a final payment to Orbital ATK
Inc. of US$40 million to be paid at the earlier of completion of
in-orbit testing or three months after the launch of HYLAS 4.
Shareholders should be aware that if the Restructuring does not
complete by 30 April 2018, the Company will default on its bond
interest payable under the existing bond indentures.
Furthermore, if the Restructuring completes but the Company is
unable to raise Additional Funds of at least US$50 million and
secure US$40 million infrequently recurring revenue in pipeline by
30 June 2018 then based on the projected cash flows of the Group,
the Company will, within the 3 months following 30 June 2018, be
highly likely to be unable to pay its creditors, as and when they
fall due for payment.
In the event that the Company is unable to meet such obligations
as a result of the failure of the Restructuring to complete or the
failure to raise sufficient Additional Funds, the Directors would
likely seek to place the Company into some form of insolvency
proceeding, or a creditor may take action to enforce or initiate an
insolvency proceeding. Any such proceeding would be likely to
result in little or no value for Shareholders.
The ability to generate additional cash flows from operations is
linked to a successful restructuring because, until the uncertainty
regarding the Group's financial position and its ability to meet
its future obligations is addressed:
1. it will be more difficult for the Group to attract and retain
customers, staff and suppliers, which will put it at a competitive
disadvantage;
2. the high cost of servicing its debt service obligations will
reduce the Group's available working capital, prohibit the Group
from investing in its business and could ultimately result in the
Group filing for insolvency; and
3. existing commercial counterparties may seek to terminate or
limit their business relationships with the Group.
Furthermore, the Directors believe that there is no reasonable
prospect that a restructuring at a later date would produce a
better outcome for the Company's stakeholders, including its
Shareholders, when compared to the Restructuring currently
proposed.
The Company is now putting the Proposals to you for approval.
From the perspective of a Shareholder, you should carefully
consider them as they fundamentally affect the future of the
Company and your interest in it.
What we recommend you do
THE INDEPENT DIRECTORS' RECOMMATION IS THAT THE INDEPENT
SHAREHOLDERS VOTE IN FAVOUR OF RESOLUTION 1 AND THE DIRECTORS'
RECOMMATION IS THAT SHAREHOLDERS VOTE IN FAVOUR OF RESOLUTIONS 2,
3, 4 AND 5, TO BE PROPOSED AT THE GENERAL MEETING WHICH HAS BEEN
CONVENED FOR 10.00 A.M. ON 25 APRIL 2018 TO PROTECT YOUR
SHAREHOLDER VALUE. UNLESS ALL OF THE RESOLUTIONS ARE PASSED WE
CANNOT MOVE FORWARD TO IMPLEMENT THE PROPOSALS. YOUR VOTE IS
ACCORDINGLY CRITICAL.
In addition, the Company is proposing to offer to all Qualifying
Shareholders the opportunity to participate in the Open Offer to
raise a maximum of GBP4.33 million (assuming full take up of the
Open Offer, but being less than the EUR5.0 million maximum amount
permitted for the Open Offer without requiring the publication by
the Company of a prospectus) through the issue of Open Offer Shares
to Qualifying Shareholders at a price of 11.225 pence per share.
Any Open Offer Shares not subscribed for by Qualifying Shareholders
will be available to other Qualifying Shareholders under the Excess
Application Facility.
This means that Shareholders can apply in the Open Offer to
acquire additional Ordinary Shares if they so wish, at the same
effective price as the price at which the US$557,035,832 in
aggregate principal amount of outstanding 2023 Notes is being
exchanged for the Exchange Shares pursuant to the Debt for Equity
Swap, and thereby mitigate some of the effect of the dilution that
the Restructuring causes to existing shareholdings.
If you wish to participate in the Open Offer, please refer to
Parts IV and V of the Circular.
If you are in any doubt about the contents of the Circular or as
to the action you should take, you are recommended to seek your own
personal financial advice immediately from your stockbroker, bank
manager, solicitor, accountant or other independent financial
adviser authorised under the under the Financial Services and
Markets Act 2000 (as amended) if you are resident in the United
Kingdom or, if not, from another appropriately authorised
independent financial adviser.
In addition, the Company announces that the U.S. Bankruptcy
Court has granted the Company's petition for an order recognising
and giving full force and effect to the Company's Scheme with
respect to its 2023 Notes as a "foreign main proceeding" under
Chapter 15 of the U.S. Bankruptcy Code (the "Recognition Order").
As previously announced, the Scheme was sanctioned by the High
Court of England and Wales on 26 March 2018.
Receipt of the Recognition Order satisfies one of the remaining
conditions precedent under the terms of the Scheme and marks a
further step towards the successful completion of the Company's
financial restructuring. Completion of the financial restructuring
remains conditional upon the satisfaction of a number of other
conditions precedent, including the approval of certain resolutions
by the Company's shareholders at the General Meeting.
Important Notices
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Capitalised terms used but not defined in this announcement
shall have the meanings given to such terms in the section headed
"Definitions".
This announcement does not constitute a prospectus for the
purposes of the Prospectus Rules of the Financial Conduct
Authority, nor does it comprise an admission document prepared in
accordance with the AIM Rules. Accordingly, this announcement has
not been approved by or filed with the Financial Conduct
Authority.
This announcement is for information purposes only and does not
constitute or contain any invitation, solicitation, recommendation,
offer or advice to any person to subscribe for, otherwise acquire
or dispose of any securities in Avanti Communications Group Plc or
any other entity in any jurisdiction. Neither this announcement nor
the fact of its distribution shall form the basis of, or be relied
on in connection with, any investment decision in respect of Avanti
Communications Group Plc.
This announcement is not for publication or distribution,
directly or indirectly, in or into the United States of America.
This announcement is not an offer of securities for sale into the
United States. The securities referred to herein have not been and
will not be registered under the U.S. Securities Act of 1933, as
amended, and may not be offered or sold in the United States,
except pursuant to an applicable exemption from registration. No
public offering of securities is being made in the United
States.
The New Ordinary Shares will not qualify for distribution under
the relevant securities laws of Australia, Canada, the Republic of
South Africa or Japan, nor has any prospectus in relation to the
New Ordinary Shares been lodged with, or registered by, the
Australian Securities and Investments Commission or the Japanese
Ministry of Finance. Accordingly, subject to certain exemptions,
the Open Offer Shares may not be offered, sold, taken up, delivered
or transferred in, into or from the United States, Australia,
Canada, the Republic of South Africa, Japan or any other
jurisdiction where to do so would constitute a breach of local
securities laws or regulations (each a "Restricted Jurisdiction")
or to or for the account or benefit of any national, resident or
citizen of a Restricted Jurisdiction.
This announcement may contain "forward-looking statements" with
respect to certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company,
including amongst other things, United Kingdom domestic and global
economic business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and
actions of governmental and regulatory authorities, the effect of
competition, inflation, deflation, the timing effect and other
uncertainties of future acquisitions or combinations within
relevant industries, the effect of tax and other legislation and
other regulations in the jurisdictions in which the Company and its
respective affiliates operate, the effect of volatility in the
equity, capital and credit markets on the Company's profitability
and ability to access capital and credit, a decline in the
Company's credit ratings; the effect of operational risks; and the
loss of key personnel. As a result, the actual future financial
condition, performance and results of the Company may differ
materially from the plans, goals and expectations set forth in any
forward-looking statements. Any forward-looking statements made in
this announcement by or on behalf of the Company speak only as of
the date they are made. Except as required by applicable law or
regulation, the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statement is based.
Cenkos Securities plc, which, in the United Kingdom, is
authorised and regulated by the Financial Conduct Authority, is
acting as nominated adviser and broker to the Company in connection
with the Proposals and will not be acting for any other person
(including a recipient of this announcement) or otherwise be
responsible to any person for providing the protections afforded to
clients of Cenkos Securities plc or for advising any other person
in respect of the Proposals or any transaction, matter or
arrangement referred to in this Announcement.
No representation or warranty, express or implied, is or will be
made as to, or in relation to, and no responsibility or liability
is or will be accepted by Cenkos or by any of its affiliates or
agents as to, or in relation to, the accuracy or completeness of
this announcement or any other written or oral information made
available to or publicly available to any interested party or its
advisers, and any liability therefor is expressly disclaimed.
For further information, please contact:
Avanti Communications Nigel Fox, Patrick Willcocks
Tel: +44 20 7749 1600
Montfort Nick Miles, James Olley
Tel: +44 203 770 7909
Cenkos Securities (Nomad) Max Hartley, Nicholas Wells, Harry
Hargreaves
Tel: +44 207 397 8900
Redleaf Communications Ralph Anderson
+44 (0)20 3757 6883
About Avanti
Avanti connects people wherever they are - in their homes,
businesses, in government and on mobiles. Through the HYLAS
satellite fleet and partners in 118 countries, the network provides
ubiquitous internet service to a quarter of the world's
population.
Avanti delivers the level of quality and flexibility that the
most demanding telecoms customers in the world seek. Avanti is the
first mover in high throughput satellite data communications in
EMEA. It has rights to orbital slots and KA-band spectrum in
perpetuity that covers an end market of over 1.7bn people. The
Group has invested $1.2bn in a network that incorporates
satellites, ground stations, datacentres and a fibre ring.
Avanti has a unique Cloud-based customer interface that is
protected by patented technology. Avanti Communications is listed
in London on AIM (AVN: LSE). www.avantiplc.com
Letter from the Chairman of Avanti Communications Group Plc
1. Introduction and summary
On 13 December 2017, your Board announced that it had entered
into a Restructuring Agreement to implement a Restructuring of the
Group's indebtedness and on 8 February 2018 it announced that it
had successfully completed the 2021 Consent Solicitations and the
2023 Consent Solicitations. On 19 February it announced that it had
launched the Scheme in connection with the Debt for Equity Swap. On
20 March 2018 it announced that the Scheme creditors had approved
the Scheme and on 26 March 2018 it announced that the Court had
approved the Scheme. Your Board today announces that:
-- it proposes to raise up to GBP4.33 million (before expenses)
by way of an open offer of up to 38,603,797 Open Offer Shares at a
price of 11.225 pence per Ordinary Share to existing shareholders;
and
-- it is progressing with the Restructuring and has convened a
General Meeting to seek Shareholder approval in relation to: (i) a
Whitewash Resolution concerning the waiver of the obligation to
make a general offer pursuant to Rule 9 of the Takeover Code that
would otherwise fall upon Solus as a result of the issue and
allotment to the Solus Funds of Exchange Shares pursuant to the
Debt for Equity Swap and (where relevant) Open Offer Shares
pursuant to the Open Offer; and (ii) resolutions to grant the Board
authority to allot the New Ordinary Shares and to disapply
statutory pre-emption rights which would otherwise apply to the
allotment of the New Ordinary Shares in connection with the Debt
for Equity Swap and the Open Offer.
The Restructuring
The Restructuring comprises:
-- a Debt for Equity Swap of all of the outstanding 2023 Notes
for 92.5 per cent. of the Company's enlarged share capital
following the issuance of the Exchange Shares (but for the
avoidance of doubt before the issuance of the Open Offer
Shares);
-- the amendment of certain terms of the 2021 Notes pursuant to
the 2021 Notes Consent Solicitation;
-- the amendment and waiver of certain standard events of
default in the 2021 Notes Indenture and the 2023 Notes Indenture
that might otherwise be triggered by the Restructuring; and
-- the amendment to the submission to jurisdiction provision of
the 2023 Notes Indenture to require that, from and after the date
of effectiveness of the amendment, each party to the 2023 Notes
Indenture irrevocably submits to the jurisdiction of the Court
until the Restructuring Agreement is either terminated or is no
longer in effect.
Further details on the Restructuring are set out in paragraph 4
of Part I and in Part II of the Circular.
The Debt for Equity Swap and the Open Offer will result in the
Solus Funds increasing their aggregate shareholding to up to a
maximum of 42.0 per cent. of the Enlarged Share Capital (assuming
that the Solus Funds subscribe for their full Open Offer
Entitlement and that no other Shareholders subscribe for Open Offer
Shares). The Restructuring is conditional, inter alia, upon the
granting of a Rule 9 Waiver and the approval of the Whitewash
Resolution in respect of Solus and the Company obtaining approval
from its Shareholders to disapply statutory pre-emption rights and
to grant the Board authority to allot the New Ordinary Shares.
Accordingly, the Board is seeking the approval of the
Independent Shareholders to the Whitewash Resolution in order to
approve the Rule 9 Waiver which the Panel has agreed with the
Company to grant. Subject to the Whitewash Resolution being passed,
the Rule 9 Waiver is a waiver of any obligation on the part of
Solus to make a general offer to Shareholders under Rule 9 of the
Takeover Code which otherwise might arise upon issue and allotment
of Exchange Shares to the Solus Funds as a result of the Debt for
Equity Swap and, if the Solus Funds participate in the Open Offer,
Open Offer Shares pursuant to the Open Offer.
Further details of the Rule 9 Waiver are set out in paragraph 10
of Part I of the Circular. Further information on Solus and the
Solus Funds is set out in paragraph 7 of Part I and in Parts VII
and VIII of the Circular.
The Open Offer
The Board recognises and is grateful for the continued support
received from Shareholders and is pleased to offer to all
Qualifying Shareholders the opportunity to participate in the Open
Offer to raise a maximum of GBP4.33 million (assuming full take up
of the Open Offer, but being less than the EUR5.0 million maximum
amount permitted for the Open Offer without requiring the
publication by the Company of a prospectus under the Prospectus
Rules) through the issue of Open Offer Shares to Qualifying
Shareholders at a price of 11.225 pence per share.
The Issue Price is the same price as the closing middle market
price of 11.225 pence per Ordinary Share on 5 April 2018, being the
last practicable Dealing Day prior to the announcement of the Open
Offer. The Issue Price is the same effective price as the price at
which the US$557,035,832 in aggregate principal amount of
outstanding 2023 Notes being exchanged for the Exchange Shares
pursuant to the Debt for Equity Swap. The New Ordinary Shares will
represent approximately 1,257.1 per cent. of the Company's issued
ordinary share capital following Admission (assuming that all the
New Ordinary Shares are issued).
The total amount that the Company could raise under the Open
Offer is GBP4.33 million (before expenses), assuming that the Open
Offer is fully subscribed.
The Open Offer is conditional, inter alia, upon the Company
obtaining approval from its Shareholders to grant the Board
authority to allot the Open Offer Shares and to disapply statutory
pre-emption rights which would otherwise apply to the allotment of
the Open Offer Shares and also upon the completion of the
Restructuring.
The purpose of the Circular is to:
-- provide you with information regarding the background to and
the reasons for the Restructuring, the Rule 9 Waiver and the Open
Offer and to explain why the Board considers the Restructuring, the
Rule 9 Waiver and the Open Offer to be in the best interests of the
Company, the Independent Shareholders and the Shareholders as a
whole;
-- explain why the Independent Directors unanimously recommend
that the Independent Shareholders vote in favour of the Whitewash
Resolution; and
-- explain why the Directors unanimously recommend the
Shareholders vote in favour of the Restructuring Resolutions and
the Open Offer Resolutions.
The Whitewash Resolution, the Restructuring Resolutions and the
Open Offer Resolutions will be proposed at the General Meeting,
notice of which is set out at the end of the Circular.
Shareholders should be aware that if the Restructuring does not
complete by 30 April 2018, the Company will default on its bond
interest payable under the existing bond indentures.
Furthermore, if the Restructuring completes but the Company is
unable to raise Additional Funds of at least US$50 million and
secure US$40 million infrequently recurring revenue in pipeline by
30 June 2018 then based on the projected cash flows of the Group,
the Company will, within the 3 months following 30 June 2018, be
highly likely to be unable to pay its creditors, as and when they
fall due for payment.
In the event that the Company is unable to meet such obligations
as a result of the failure of the Restructuring to complete or the
failure to raise sufficient Additional Funds, the Directors would
likely seek to place the Company into some form of insolvency
proceeding, or a creditor may take action to enforce or initiate an
insolvency proceeding. Any such proceeding would be likely to
result in little or no value for Shareholders.
These possibilities are considered to be realistic, not
remote.
2. The Company
The Company is a satellite operator providing fixed satellite
services in Europe, the Middle East and Africa through its fleet of
Ka-band satellites. Ka-band systems have higher frequency ranges
and significantly higher spectral efficiency than satellite systems
operating in other bands, such as Ku-band and C-band, allowing
larger data carrying capacity at comparatively lower cost. The
Company's satellite fleet is positioned in two of its three orbital
slots, which are recorded in the International Telecoms Union
Master International Frequency Register, providing coverage in
Europe, the Middle East and Africa. The Company anticipates that
its HYLAS 3 and HYLAS 4 satellites, which are not yet in operation,
will primarily address high-growth markets in Africa and the Middle
East, where terrestrial-based communications infrastructure is
generally less developed and often not economically viable to
develop, as well as providing back-up and growth capacity over
Europe.
The Company sells satellite data communications services on a
wholesale basis to a range of service providers who supply four key
end markets: Broadband, Government, Enterprise and Backhaul. The
Company's current fleet consists of two Ka-band satellites, HYLAS 1
and HYLAS 2, which have been commercially operational since April
2011 and October 2012, respectively, and Artemis, a multiband
satellite acquired from the European Space Agency (the "ESA") on 31
December 2013, which was successfully re-orbited in November 2017,
thereby ending the life of the former ESA spacecraft. The Company
also has a satellite payload, HYLAS 2-B, which it has operated
since November 2016 under an indefeasible right of use agreement
entered into in June 2015 with another satellite operator, as well
as a payload on the ESA's EDRS-C satellite, HYLAS 3, which is
currently under construction and continues to experience delays and
is now expected to launch in the first half of 2019 (although such
date is subject to change). As of 30 June 2017, the Company had
incurred approximately US$49.5 million and expected to incur an
additional US$37.5 million in connection with the construction and
launch of HYLAS 3.
The Company's HYLAS 4 satellite, which completes its coverage of
Europe, the Middle East and Africa, was launched on 5 April 2018,
with the target of being in orbital position ready for service in
July 2018. The launch configuration for this slot enabled
additional fuel to be embarked upon HYLAS 4, permitting it to reach
geostationary orbit earlier than would otherwise be the case and
enabled sufficient fuel to be embarked to support the satellite for
up to 19 years in orbit.
HYLAS 4 is expected to generate revenue from July 2018, largely
within the existing fixed cost base, and to have a strong positive
effect on the Company's business as it completes EMEA coverage and
greatly increases the amount of capacity available in mature
markets in Western Europe and new markets in Africa. The efficient
procurement of HYLAS 4 will bring the overall fleet cost per MHz
down significantly, mitigating some of the effects of falling
global prices for satellite bandwidth. The Company is in
discussions with a number of current and new distributors to sign
up master partnership distribution agreements to market this new
capacity, which is largely over sub-Saharan Africa countries. As of
30 June 2017, the Company had incurred costs of approximately
US$237.4 million and expected to incur an additional US$121.8
million in connection with the construction, launch and insurance
of HYLAS 4.
The Company is a public limited company incorporated under the
laws of England and Wales, with subsidiaries incorporated in
England, Isle of Man, Germany, Sweden, Turkey, Cyprus, Kenya,
Nigeria, Tanzania and South Africa. The Company's Ordinary Shares
are admitted to trading on AIM.
3. Background to and details of the proposed Restructuring
As at 31 December 2017, the Company had US$118.0 million of
indebtedness maturing in 2020, US$323.3 million of indebtedness
maturing in 2021 and US$557.0 million of indebtedness maturing in
2023. In addition, the Company has a final payment to Orbital ATK
Inc. of US$40 million to be paid at the earlier of completion of
in-orbit testing or three months after the launch of HYLAS 4.
Shareholders should be aware that if the Restructuring does not
complete by 30 April 2018, the Company will default on its bond
interest payable under the existing bond indentures.
Furthermore, if the Restructuring completes but the Company is
unable to raise Additional Funds of at least US$50 million and
secure US$40 million infrequently recurring revenue in pipeline by
30 June 2018 then based on the projected cash flows of the Group,
the Company will, within the 3 months following 30 June 2018, be
highly likely to be unable to pay its creditors, as and when they
fall due for payment.
In the event that the Company is unable to meet such obligations
as a result of the failure of the Restructuring to complete or the
failure to raise sufficient Additional Funds, the Directors would
likely seek to place the Company into some form of insolvency
proceeding, or a creditor may take action to enforce or initiate an
insolvency proceeding. Any such proceeding would be likely to
result in little or no value for Shareholders.
The ability to generate additional cash flows from operations is
linked to a successful restructuring because, until the uncertainty
regarding the Group's financial position and its ability to meet
its future obligations is addressed:
1. it will be more difficult for the Group to attract and retain
customers, staff and suppliers, which will put it at a competitive
disadvantage;
2. the Group's high cost of servicing its debt obligations will
reduce its the Group's available working capital, prohibit the
Group from investing in its business and could ultimately result in
the Group filing for insolvency; and
3. existing commercial counterparties may seek to terminate or
limit their business relationships with the Group.
Furthermore, the Directors believe that there is no reasonable
prospect that a restructuring at a later date would produce a
better outcome for the Company's stakeholders, including its
Shareholders, when compared to the Restructuring currently
proposed.
For these reasons, the directors of the Company are currently
recommending the Restructuring, further details of which are
described in paragraph 4 below and in Part II of the Circular.
4. Terms of the Restructuring
As the Company has sought to create a sustainable long-term
capital structure from which to further develop its business, it
commenced negotiations with an ad hoc committee of Note Holders and
the Consenting Shareholders to develop a restructuring plan to
reduce the aggregate amount of its outstanding indebtedness,
decrease its future interest expense and enable the potential
raising of new liquidity. In furtherance thereof, the Company
entered into the Restructuring Agreement with certain of the
Consenting Holders and Consenting Shareholders on 13 December 2017
in order to implement the Restructuring.
The Restructuring Agreement sets out the terms and conditions
pursuant to which the Consenting Holders and Consenting
Shareholders have agreed with the Company that they will take
actions to support the implementation of the Restructuring,
including, among other things, (1) consenting to the Majority
Proposed Amendments and Proposed Waiver, the 2023 Jurisdiction
Proposed Amendments and the 2021 90% Proposed Amendments in the
2021 Consent Solicitations and the 2023 Consent Solicitations, (2)
voting in favour of the Scheme with respect to the Debt for Equity
Swap, and (3) approving the Rule 9 Waiver and the Resolutions to
authorise the Directors to allot Ordinary Shares in connection with
the Debt for Equity Swap and the Open Offer (as applicable).
In the Restructuring Agreement, the parties agree that if the
Takeover Panel determines that any provision of the Restructuring
Agreement that requires the Company 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 Takeover Code, that provision shall have no effect and
shall be disregarded.
The material terms of the Restructuring Agreement are described
in Part II of the Circular and a summary is set out below.
Debt for Equity Swap
As of the date of the Circular, the Company has US$557,035,832
in aggregate principal amount of outstanding 2023 Notes.
In order to substantially reduce its outstanding indebtedness
and significantly decrease its future interest expense, the Company
will seek to implement the Debt for Equity Swap of all of its
outstanding 2023 Notes for 1,999,676,704 Exchange Shares, which
will represent approximately 92.5 per cent. of the Company's
enlarged share capital following the issuance of the Exchange
Shares (but for the avoidance of doubt before the issuance of the
Open Offer Shares).
The Debt for Equity Swap will be implemented through the Scheme.
In order to approve the Scheme with respect to the Debt for Equity
Swap, a majority in number of 2023 Note Holders representing at
least 75 per cent. in aggregate principal amount of the 2023 Notes
held by those 2023 Note Holders voting in person, or by proxy at a
meeting of 2023 Note Holders, must vote in favour of the Scheme
with respect to the Debt for Equity Swap and the Scheme must then
be sanctioned by the Court. The Scheme was approved by the
requisite amount of 2023 Note Holders at the Scheme Meeting on 20
March 2018 and sanctioned by the Court at the Court Hearing on 26
March 2018.
If the Restructuring Effective Date has not occurred by the
Longstop Date, the terms of the Scheme will lapse, unless such date
has been extended pursuant to the terms of the Scheme.
Further details of the Debt for Equity Swap are set out in Part
II of the Circular.
2021 90% Proposed Amendments
In addition to the proposed reduction in indebtedness and
interest expense resulting from the Debt for Equity Swap, the
Company sought 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 2021
Notes. Details of the 2021 90% Proposed Amendments are set out in
Part II of the Circular.
In order to implement the 2021 90% Proposed Amendments, the
Company sought consent from the 2021 Note Holders to the 2021 90%
Proposed Amendments pursuant to the 2021 Consent Solicitations,
which were launched on 25 January 2018. Approval of the 2021 90%
Proposed Amendments required the Company to obtain consent from
2021 Note Holders representing at least 90 per cent. in aggregate
principal amount of the outstanding 2021 Notes. Such approval was
obtained on 8 February 2018.
Further details of the 2021 90% Proposed Amendments are set out
in Part II of the Circular.
Majority Proposed Amendments and Proposed Waiver
Avanti has also carried out 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. The Majority Proposed Amendments
and Proposed Waiver were sought pursuant to the 2021 Consent
Solicitations and 2023 Consent Solicitations that were launched on
25 January 2018. The requisite approvals to the Majority Proposed
Amendments and Proposed Waiver were obtained on 8 February
2018.
Further details of the Majority Proposed Amendments and Proposed
Waiver are set out in Part II of the Circular.
2023 Jurisdiction Proposed Amendments
In addition, Avanti sought consent from 2023 Note Holders
representing at least 75 per cent. in aggregate principal amount of
outstanding 2023 Notes to amend the submission to jurisdiction
provision of the 2023 Notes Indenture to require that, from and
after the date of effectiveness of the amendment, each party to the
2023 Notes Indenture irrevocably submit to the jurisdiction of the
Court until the Restructuring Agreement is either terminated or is
no longer in effect. The 2023 Jurisdiction Proposed Amendments were
sought pursuant to the 2023 Consent Solicitation that was launched
on 25 January 2018. The requisite approvals to the 2023
Jurisdiction Proposed Amendments were obtained on 8 February
2018.
Further details of the 2023 Jurisdiction Proposed Amendments are
set out in Part II of the Circular.
Waiver of Rule 9 of the Takeover Code in relation to the
Restructuring
It is expected that, immediately following the Debt for Equity
Swap (but for the avoidance of doubt before the issuance of the
Open Offer Shares), the Solus Funds would hold in aggregate up to a
maximum of 41.5 per cent. of the enlarged share capital of the
Company. Immediately following the Open Offer, it is expected that
the Solus Funds would hold in aggregate up to a maximum of 42.0 per
cent. of the Enlarged Share Capital (assuming that the Solus Funds
subscribe for their full Open Offer Entitlements and that no other
Shareholders subscribe for Open Offer Shares). 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
has sought 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 Takeover Code.
Further details of the Rule 9 Waiver are contained in paragraph
10 of this Part I.
The Company will therefore convene a General Meeting of its
Shareholders for the purposes of obtaining the necessary approvals
to, inter alia, allot the New Ordinary Shares pursuant to the Debt
for Equity Swap and the Open Offer and to obtain the approval from
a majority of Independent Shareholders, on a poll, of the Rule 9
Waiver.
5. Update on outlook and profit forecasts
HYLAS 4 launched on 5 April 2018 and the Company expects
services to commence in July 2018. As at 30 June 2017, the Company
has incurred costs of approximately US$237.4 million and expected
to incur additional costs of US$121.8 million in connection with
the construction, launch and insurance of HYLAS 4.
HYLAS 3 continues to experience delays and the ESA has now
advised Avanti not to expect a launch until the first half of 2019.
The Company is currently exploring the best options for the
exploitation of HYLAS 3. As at 30 June 2017, the Company had
incurred costs of approximately US$49.5 million and expected to
incur an additional US$37.5 million in connection with the
construction and launch of HYLAS 3.
The Directors forecast that revenue for the current financial
year will not be less than US$50 million. In addition, there is a
large infrequently recurring transaction in the pipeline that, if
it closes, would add a further US$40 million to Group revenue, with
US$18 million of associated costs, in the current year. With effect
from the end of the current financial year, the Company expects
substantial growth in revenue driven off the introduction of HYLAS
4 to the fleet opening up new markets in sub-Saharan Africa.
Excluding the costs associated with the potential large
transaction referred to above, the Directors forecast that costs of
sale and operating expenditure for the current financial year will
be US$86 million. This includes US$2m of costs related to the
ARTEMIS satellite which will not recur in future years and US$9m of
cost associated with equipment sold to customers which is expected
to reduce in future financial years. Therefore underlying costs,
are expected to fall within the range of US$75m to US$80m*.
In the following two years underlying costs are expected to grow
at c. 5 per cent. per annum subject to exchange rates and the mix
of bandwidth revenues compared to kit and project revenues.
The Company anticipates that utilisation of HYLAS 4 will be
20-25 per cent. by the end of the fiscal year ending 30 June 2020,
based on current operating assumptions.
Capital expenditure of US$117 million expected for the fiscal
year ending 30 June 2018 primarily relates to the launch of HYLAS
4. This represents an increase from US$92 million capital
expenditure expected for the fiscal year ending 30 June 2018 that
was reported in the Company's update on outlook on 20 December
2016. This increase is due to the phasing of the expenditure with
less spent in the fiscal year ended 30 June 2017 than was forecast
at that time. Of the US$117.0 million expected, US$14.8 million of
this was incurred in the three months ended 30 September 2017. The
balance of US$102.2 million can be broken down as follows:
-- US$40.0 million due to Orbital ATK Inc., to be paid at the
earlier of completion of in-orbit testing or 3 months
post-launch;
-- US$21.27 million, which was paid to Arianespace in December 2017; and
-- the remaining capital expenditure split between launch
insurance and the ground infrastructure.
Of the US$19 million of capital expenditure expected for the
fiscal year ending 30 June 2019 (previously US$32 million), the
majority relates to the ground earth station in Senegal.
The Company's working capital position has stabilised following
the provisions made in the fiscal year ended 30 June 2017. The main
variable remains the ongoing arbitration for the recovery of the
debt due from the Ministry of Defence of the Government of
Indonesia, as discussed in further detail in the Company's
financial statements for the fiscal year ended 30 June 2017. The
Company is confident that it will recover the full outstanding
amount.
The Company is forecasting a modest increase in working capital
through the fiscal year ending 30 June 2019 as the Company sells
capacity into new geographies and markets served by HYLAS 4.
The Company does not expect to pay corporation tax in the medium
term due to more than US$300 million of gross losses accumulated in
the fiscal year ended 30 June 2017, mainly related to start-up
costs, capitalised interest and capital allowances.
As of 31 December 2017, the Company had cash and cash
equivalents of approximately US$68.0 million.
* Underlying costs for FY18 of US$75m-US$80m are reached after
deducting US$2m of costs incurred in operating and re-orbiting to a
graveyard orbit the ARTEMIS satellite during FY18; and a reduction
in the cost associated with equipment sold to customers to the
anticipated future level of costs. As the Group focusses its
resources on the sale of satellite bandwidth, it projects that
costs associated with equipment sales will fall to a level of
US$1.5 million per annum.
Profit Forecasts
As part of this outlook, the Company is publishing the Profit
Forecast and certain other forward-looking information set out in
Part VI (Profit Forecasts) of the Circular.
6. Key Financial Information
Set out below is key financial information extracted from the
Company's Annual Reports for the years ended 30 June 2017, 2016 and
2015 and the Company's Half-Year results for the six months ended
31 December 2017.
Six months Year ended Year ended Year ended
to 31 December 30 June 2017 30 June 2016 30 June 2015
2017
US$'000 US$'000 US$'000 US$'000
Revenue 20,167 56,578 82,796 85,181
Impairment charges - -123,981 - -
Operating loss -30,002 -203,702 -39,948 -32,834
Exceptional gain on - 219,203 - -
substantial modification
of debt
Loss after tax -85,592 -65,691 -69,215 -73,391
Net increase/(decrease)
in cash and cash equivalents 35,707 -23,654 -65,824 -73,070
Total assets 918,683 807,799 942,273 881,835
Net assets/(liabilities) 53,869 133,667 201,510 304,713
Cash and cash equivalents 68,442 32,735 56,389 122,213
The information shown above is a summary of the Company's
financial information for the periods indicated. Shareholders
should review the Company's complete Annual Reports and Half-Year
Results in making their decision which are available on the
Company's website
http://www.avantiplc.com/investors/results-and-reports/.
7. Information on Solus and the Solus Funds
Solus, an investment adviser registered with the U.S. Securities
and Exchange Commission, acts as investment adviser to the Solus
Funds which are private investment funds. Solus and the Solus Funds
specialise in investing in event-driven, distressed and special
situation opportunities, but each Solus Fund has its own investment
program. Investors in the Solus Funds include funds of funds,
corporate pensions, public pensions and proprietary capital, among
other types of investors.
The Solus Funds are each Shareholders and in aggregate hold
15.9% of the Existing Ordinary Shares.
The Form ADV Part 2A filed on 29 March 2018 with the SEC shows
that, as at 31 December 2017, Solus had aggregate net assets
(including committed but undrawn capital) under management
(including the Solus Funds) of approximately US$6.3 billion.
Further information on Solus and the Solus Funds is set out in
Parts VII and VIII of the Circular.
Maximum potential controlling position
Immediately following completion of the Proposals, the Solus
Funds will hold in aggregate up to a maximum of 914,065,771
Ordinary Shares, representing up to 42.0 per cent. of the Enlarged
Share Capital (assuming that the Solus Funds subscribe for their
full Open Offer Entitlement and that no other Shareholders
subscribe for Open Offer Shares and also assuming that no other
person has exercised any option or any other right to subscribe for
shares in the Company following the date of the Circular).
8. The Open Offer
Details of the Open Offer
The Company considers it important that Qualifying Shareholders
have an opportunity (where it is practicable for them to do so) to
participate in an Open Offer for Open Offer Shares at the same
effective price as the price at which the US$557,035,832 in
aggregate principal amount of outstanding 2023 Notes is being
exchanged for the Exchange Shares pursuant to the Debt for Equity
Swap and accordingly the Company is making the Open Offer to
Qualifying Shareholders. The Company is proposing to raise a
maximum of GBP4.33 million (before expenses) (assuming full take up
of the Open Offer but being less than the EUR5 million maximum
amount permitted in connection with the Open Offer without
requiring the publication by the Company of a prospectus under the
Prospectus Rules) through the issue of up to 38,603,797 Open Offer
Shares.
The Open Offer Shares are available to Qualifying Shareholders
pursuant to the Open Offer at the Issue Price of 11.225 pence per
Open Offer Share, payable in full on acceptance. Any Open Offer
Shares not subscribed for by Qualifying Shareholders will be
available to Qualifying Shareholders under the Excess Application
Facility.
Qualifying Shareholders may apply for Open Offer Shares under
the Open Offer at the Issue Price on the following basis:
5 Open Offer Shares for every 21 Existing Ordinary Shares
held
by the Qualifying Shareholder on the Record Date
Entitlements of Qualifying Shareholders will be rounded down to
the nearest whole number of Open Offer Shares. Fractional
entitlements which would otherwise arise will not be issued to the
Qualifying Shareholders but will be aggregated and made available
under the Excess Application Facility. The Excess Application
Facility enables Qualifying Shareholders to apply for Excess Shares
in excess of their Open Offer Entitlement. Not all Shareholders
will be Qualifying Shareholders. Shareholders who are located in,
or are citizens of, or have a registered office in certain overseas
jurisdictions will not qualify to participate in the Open Offer.
The attention of Overseas Shareholders is drawn to paragraph 6 of
Part V of the Circular.
Valid applications by Qualifying Shareholders will be satisfied
in full up to their Open Offer Entitlements as shown on the
Application Form. Applicants can apply for less or more than their
entitlements under the Open Offer but the Company cannot guarantee
that any application for Excess Shares under the Excess Application
Facility will be satisfied as this will depend in part on the
extent to which other Qualifying Shareholders apply for less than
or more than their own Open Offer Entitlements. The Company may
satisfy valid applications for Excess Shares of applicants in whole
or in part but reserves the right not to satisfy any excess above
any Open Offer Entitlement. Applications made under the Excess
Application Facility will be scaled back (at the Company's sole
discretion) pro rata to the number of shares applied for if
applications are received from Qualifying Shareholders for more
than the available number of Excess Shares.
Application has been made for the Open Offer Entitlements to be
admitted to CREST. It is expected that such Open Offer Entitlements
will be credited to CREST on 10 April 2018. The Open Offer
Entitlements will be enabled for settlement in CREST until 10.00
a.m. on 26 April 2018. Applications through the CREST system may
only be made by the Qualifying CREST Shareholder originally
entitled or by a person entitled by virtue of bona fide market
claims. The Open Offer Shares must be paid in full on application.
The latest time and date for receipt of completed Application Forms
or CREST applications and payment in respect of the Open Offer is
10.00 a.m. on 26 April 2018. The Open Offer is not being made to
certain Overseas Shareholders, as set out in paragraph 6 of Part V
of the Circular.
Qualifying Shareholders should note that the Open Offer is not a
rights issue and therefore the Open Offer Shares which are not
applied for by Qualifying Shareholders will not be sold in the
market for the benefit of the Qualifying Shareholders who do not
apply under the Open Offer. The Application Form is not a document
of title and cannot be traded or otherwise transferred.
Further details of the Open Offer and the terms and conditions
on which it is being made, including the procedure for application
and payment, are contained in Part V of the Circular and on the
accompanying Application Form.
The Open Offer is conditional upon the completion of the
Restructuring and Open Offer Resolutions being duly passed at the
General Meeting and Admission of the Open Offer Shares becoming
effective on or before 8.00 a.m. on 30 April 2018 (or such later
time and/or date as the Company and Cenkos may agree, but in any
event by no later than 8.00 a.m. on 31 May 2018). Accordingly, if
the conditions to the Open Offer are not satisfied or waived (where
capable of waiver), the Open Offer will not proceed and the Open
Offer Shares will not be issued and all monies received by the
Receiving Agent will be returned to the applicants (at the
applicant's risk and without interest) as soon as possible, but
within 14 days thereafter. Any Open Offer Entitlements admitted to
CREST will thereafter be disabled.
The Open Offer Shares will be issued free of all liens, charges
and encumbrances and will, when issued and fully paid, rank pari
passu in all respects with the Existing Ordinary Shares, including
the right to receive all dividends and other distributions
declared, made or paid after the date of their issue.
Paul Walsh, Andrew Green and Paul Johnson have confirmed that
they intend to take up their respective Open Offer Entitlements in
full and David Bestwick and Nigel Fox have confirmed that they
intend to take up their respective Open Offer Entitlements at least
in part.
The interests of each of the Directors and their family (within
the meaning of the AIM Rules) in the issued ordinary share capital
of the Company and the existence of which is known to, or could
with reasonable due diligence be ascertained by, any Director (i)
as at the date of the Circular and (ii) as they are expected to be
on Admission of the Open Offer Shares are as follows:
Number of Percentage Number of Percentage
Existing Ordinary of existing Ordinary Shares of Ordinary
Shares issued share (following Shares (following
capital Admission)(1) Admission)(1)
Kyle Whitehill - - - -
Paul Walsh(2) 230,000 0.14% 234,107 0.01%
David Bestwick(3) 1,301,954 0.80% 1,325,203 0.06%
Peter Reed - - - -
Craig Chobor - - - -
Michael Leitner - - - -
Andrew Green(4) 21,888 0.01% 22,279 0.00%
Paul Johnson(5) 10,000 0.01% 10,179 0.00%
Richard Mastoloni - - - -
Christopher McLaughlin - - - -
Alan Harper - - - -
Nigel Fox(6) 134,580 0.08% 136,983 0.01%
Total 1,698,422 1.05% 1,728,751 0.08%
1. Assumes that all of the Exchange Shares have been issued and
that 100 per cent. of the Ordinary Shares theoretically available
under the Open Offer are subscribed for in the Open Offer.
2. Paul Walsh has confirmed to the Company that he intends to
subscribe for his Open Offer Entitlement in full.
3. David Bestwick has confirmed to the Company that he intends
to subscribe for his Open Offer Entitlement at least in part. The
figures in this table assume that Mr Bestwick subscribes for his
Open Offer Entitlement in full.
4. Andrew Green has confirmed to the Company that he intends to
subscribe for his Open Offer Entitlement in full.
5. Paul Johnson has confirmed to the Company that he intends to
subscribe for his Open Offer Entitlement in full.
6. Nigel Fox has confirmed to the Company that he intends to
subscribe for his Open Offer Entitlement at least in part. The
figures in this table assume that Mr Fox subscribes for his Open
Offer Entitlement in full.
Settlement and dealings
Application will be made to the London Stock Exchange for the
New Ordinary Shares to be admitted to trading on AIM. It is
expected that Admission will become effective at 8.00 a.m. on 26
April 2018 in respect of the Exchange Shares and at 8.00 a.m. on 30
April 2018 in respect of the Open Offer Shares.
The New Ordinary Shares will, when issued, rank pari passu in
all respects with the Existing Ordinary Shares including the right
to receive dividends and other distributions declared following
Admission.
9. Use of proceeds
The Directors intend that the net proceeds of the Open Offer of
up to GBP4.32 million (assuming that the Open Offer is fully
subscribed) will be used to fund general working capital
requirements.
10. The City Code on Takeovers and Mergers
The acquisition of New Ordinary Shares by the Solus Funds
pursuant to the Debt for Equity Swap and, if the Solus Funds
participate in the Open Offer, pursuant to the Open Offer, gives
rise to certain considerations and consequences for Solus under the
Takeover Code. Brief details of the Panel, the Takeover Code and
the protections they afford to Shareholders are described
below.
The Takeover Code is issued and administered by the Panel. The
Takeover Code applies to all takeover and merger transactions,
however effected, where the offeree company is, inter alia, a
listed or unlisted public company incorporated in the United
Kingdom. The Company is such a company and Shareholders are
entitled to the protections afforded by the Takeover Code.
Under Rule 9 of the Takeover Code, any person who acquires an
interest (as defined in the Takeover Code) in shares which, taken
together with shares in which he and persons acting in concert with
him are already interested, carry 30 per cent. or more of the
voting rights in a company which is subject to the Takeover Code is
required to make a general offer to all the remaining shareholders
to acquire their shares.
Similarly, when any person, together with persons acting in
concert with him, is interested in shares which, in aggregate,
carry not less than 30 per cent. of the voting rights of a company
but does not hold shares carrying more than 50 per cent. of such
voting rights, a general offer will normally be required if any
further interest in shares is acquired by any such person, or any
person acting in concert with him, which increases the percentage
of shares carrying voting rights in which he is interested.
An offer under Rule 9 must be made in cash (or with a full cash
alternative) at a price not less than the highest price paid by the
person required to make the offer, or any person acting in concert
with him, for any interest in shares of the company during the 12
months prior to the announcement of the offer.
Rule 9 of the Takeover Code further provides, amongst other
things, that where any person who, together with persons acting in
concert with him holds over 50 per cent. of the voting rights of a
company, acquires an interest in shares which carry additional
voting rights, then they will not be required to make a general
offer to the other shareholders to acquire the balance of their
shares.
Under the Takeover Code, a concert party arises where persons
who, pursuant to an agreement or understanding (whether formal or
informal), co-operate to obtain or consolidate control (as defined
below) of a company or to frustrate the successful outcome of an
offer for a company. Control means holding, or aggregate holdings,
of shares carrying 30 per cent. or more of the voting rights of the
company, irrespective of whether the holding or holdings give de
facto control.
As at the date of the Circular, the Solus Funds are in aggregate
interested in 15.9 per cent. of the voting rights of the
Company.
The interest of the Solus Funds in the Enlarged Share Capital of
the Company following completion of the Debt for Equity Swap and
the Open Offer (assuming that the Solus Funds subscribe for their
full Open Offer Entitlements and that no other Shareholders
subscribe for Open Offer Shares and also assuming that no other
person has exercised any option or any other right to subscribe for
shares in the Company following the date of the Circular) will
increase to up to a maximum of 42.0 per cent. Solus would normally
be obliged to make a general offer, pursuant to Rule 9 of the
Takeover Code, to all other Shareholders to acquire their Ordinary
Shares. However, in this instance, the Panel has agreed to waive
the obligation to make a general offer that would otherwise arise
as a result of the Solus Funds acquiring Exchange Shares pursuant
to the Debt for Equity Swap and (where relevant) Open Offer Shares
pursuant to the Open Offer subject to the approval of the
Independent Shareholders on a poll at the General Meeting which
will be sought pursuant to Resolution 1. To be passed, this
Resolution will require the approval of a simple majority of votes
cast on that poll. Only Independent Shareholders will be entitled
to vote on this Resolution. Solus (voting on behalf of the Solus
Funds), Great Elm Capital Management, Inc. (voting as investment
manager on behalf of its underlying funds), Tennenbaum Capital
Partners (voting as investment manager on behalf of its underlying
funds), and any other Shareholders who are also 2023 Note Holders
will be ineligible to vote on the Whitewash Resolution as a result
of their participation in the Debt for Equity Swap.
Following completion of the Restructuring and the Open Offer,
the Solus Funds will be interested in, in aggregate, shares
carrying more than 30 per cent. of the Company's voting share
capital but will not hold shares comprising more than 50 per cent.
of such voting rights. Following completion of Admission of the
Exchange Shares and the Open Offer Shares, Rule 9 of the Takeover
Code will continue to apply to Solus, requiring a general offer to
be made to all Shareholders if the Solus Funds or persons acting in
concert with them acquire any Ordinary Shares in addition to those
which are the subject of the Whitewash Resolution, unless a further
waiver is obtained (or in certain other limited circumstances).
Shareholders should note that the waiver of Rule 9 of the Takeover
Code which the Panel has agreed to give (conditional on the
Whitewash Resolution being passed by the Shareholders) is only in
respect of the acquisition of Ordinary Shares by the Solus Funds as
a result of the Restructuring and the Open Offer and not in respect
of any other future acquisition of Ordinary Shares by the Solus
Funds or persons acting in concert with them. In the event that the
Whitewash Resolution is passed by Independent Shareholders at the
General Meeting, Solus will not be restricted from making an offer
for the Company but will not be required to make an offer.
The Takeover Code requires the independent directors of a
company to receive competent independent advice as to whether the
terms of the transaction are fair and reasonable. Accordingly,
Cenkos, as adviser to the Company, has provided formal advice to
the Independent Directors regarding the merits of the Restructuring
(including the Debt for Equity Swap) and the Open Offer. Cenkos
confirms that it is independent of Solus and the Solus Funds and
has no personal, financial or commercial relationship, arrangement
or undertaking with Solus or any of the Solus Funds.
For the avoidance of doubt, this waiver applies only in respect
of increases in shareholdings of the Solus Funds resulting from the
Debt for Equity Swap and the Open Offer and not in respect of other
increases in its holdings. Mr Chobor, who is connected with Solus,
has not taken part in any decision of the Independent Directors
relating to the proposal to seek a waiver of Rule 9 from the
Panel.
Further background information in relation to Solus and the
Solus Funds is set out in Part VII of the Circular.
11. Effect of the Restructuring and the Open Offer
Upon Admission of the New Ordinary Shares, and assuming full
take up of the Open Offer Entitlements and no further exercise of
options under the Company's share schemes, the Enlarged Share
Capital is expected to be 2,200,416,450 Ordinary Shares. On this
basis, the New Ordinary Shares will represent approximately 92.5
per cent. of the Enlarged Share Capital.
Following the issue of the New Ordinary Shares pursuant to the
Restructuring and the Open Offer, assuming full take up of the Open
Offer Entitlements and no further exercise of options under the
Share Option Schemes, Qualifying Shareholders who do not take up
any of their Open Offer Entitlements will suffer a dilution of
approximately 1,257.1 per cent. to their interests in the Company.
If a Qualifying Shareholder takes up his Open Offer Entitlement in
full he will suffer a dilution of approximately 996.2 per cent. to
his interest in the Company.
12. Risk Factors
Shareholders should consider fully and carefully the risk
factors associated with the Restructuring, the Open Offer and the
operations of the Group. Your attention is drawn to the risk
factors in Part III of the Circular.
13. The General Meeting
Set out at the end of the Circular is a notice convening the
General Meeting to be held on 25 April 2018 at The Bridewell Suite,
Crowne Plaza London - The City, 19 New Bridge Street, London EC4V
6DB at 10.00 a.m., at which the Resolutions will be proposed for
the purposes of implementing the Whitewash, the Restructuring and
the Open Offer.
IMPORTANT NOTE: Shareholders who are also 2023 Notes Holders are
not entitled to vote on Resolution 1 as a result of their
participation in the Debt for Equity Swap. All Shareholders are
entitled to vote on Resolutions 2, 3, 4 and 5.
Resolution 1, which will be proposed as an ordinary resolution
to be taken on a poll and in respect of which only Independent
Shareholders will be entitled to vote, seeks the approval of
Independent Shareholders to a waiver of the obligation on Solus
which would otherwise arise under Rule 9 of the Takeover Code as a
result of the Solus Funds' participation in the Debt for Equity
Swap and/or the Open Offer. Solus (voting on behalf of the Solus
Funds), Great Elm Capital Management, Inc. (voting as investment
manager on behalf of its underlying funds), Tennenbaum Capital
Partners, LLC (voting as investment manager on behalf of its
underlying funds) and any other Shareholders who are also 2023
Notes Holders (who, in each case, are deemed to be non-independent
shareholders due to their participation in the Debt for Equity
Swap) will not be entitled to vote on Resolution 1.
Resolution 2, which will be proposed as an ordinary resolution
and which is subject to the passing of Resolutions 1 and 3, is to
authorise the Directors to allot 1,999,676,704 Exchange Shares in
connection with the Debt for Equity Swap provided that such
authority shall expire on the date falling 18 months after the date
of the resolution or the next annual general meeting of the
Company, whichever is the earlier. This amount represents
approximately 1,233.3 per cent. of the issued share capital of the
Company.
Resolution 3, which will be proposed as a special resolution and
which is subject to the passing of Resolutions 1 and 2, disapplies
Shareholders' statutory pre-emption rights in relation to the issue
of the Exchange Shares pursuant to the Debt for Equity Swap
provided that such authority shall expire on the date falling 18
months after the date of the resolution or the next annual general
meeting of the Company, whichever is the earlier.
The Board may only use the authorities conferred by Resolutions
2 and 3 in connection with the Debt for Equity Swap.
Resolution 4, which will be proposed as an ordinary resolution
and which is conditional upon the passing of Resolutions 1, 2, 3
and 5, is to authorise the Directors to allot up to 38,603,797 Open
Offer Shares in connection with the Open Offer and otherwise to
allot relevant securities up to GBP7,334,721.50 in nominal value
(representing one third of the issued share capital following
Admission of the New Ordinary Shares) provided that such authority
shall expire on the date falling 18 months after the date of the
resolution or on the date of the next annual general meeting of the
Company, whichever is the earlier.
Resolution 5, which will be proposed as a special resolution and
which is conditional upon the passing of Resolutions 1, 2, 3 and 4,
disapplies Shareholders' statutory pre-emption rights in relation
to the issue of the Open Offer Shares pursuant to the Open Offer
and in connection with an offer of equity securities to
Shareholders but subject to such exclusions or other arrangements,
such as fractional entitlements and overseas shareholders as the
Director's consider necessary. Resolution 5 grants further
authority to allot equity securities for cash on a non-pre-emptive
basis up to an aggregate nominal amount of GBP1,100,208.23
(representing 5 per cent. of the issued share capital following
Admission of the Exchange Shares and the Open Offer Shares)
provided that such authority shall expire on the date falling 18
months after the date of the resolution or on the date of the next
annual general meeting of the Company, whichever is the
earlier.
14. Action to be taken
In respect of the General Meeting
A Form of Proxy for use at the General Meeting accompanies the
Circular. The Form of Proxy should be completed and signed in
accordance with the instructions thereon and returned to the
Company's registrars, Neville Registrars Limited, Neville House, 18
Laurel Lane, Halesowen, West Midlands B63 3DA, United Kingdom, as
soon as possible, but in any event so as to be received by no later
than 10.00 a.m. on 23 April 2018 (or, if the General Meeting is
adjourned, 48 hours (excluding any part of a day that is not a
working day) before the time fixed for the adjourned meeting).
If you hold your Existing Ordinary Shares in uncertificated form
in CREST, you may vote using the CREST Proxy Voting service in
accordance with the procedures set out in the CREST Manual. Further
details are also set out in the notes accompanying the Notice of
General Meeting at the end of the Circular. Proxies submitted via
CREST must be received by Neville Registrars Limited (ID 7RA11) by
no later than 10.00 a.m. on 23 April 2018 (or, if the General
Meeting is adjourned, 48 hours (excluding any part of a day that is
not a working day) before the time fixed for the adjourned
meeting).
The completion and return of a Form of Proxy or the use of the
CREST Proxy Voting Service will not preclude Shareholders from
attending the General Meeting and voting in person should they so
wish.
Members may also appoint a proxy or proxies electronically by
registering the proxy with Neville Registrars Limited at
www.sharegateway.co.uk using your personal proxy registration code
(Activity Code) shown on the Form of Proxy. For an electronic proxy
appointment to be valid, the appointment must be received by the
Company's registrars by the latest time(s) specified for receipt of
Form(s) of Proxy and votes via CREST.
In respect of the Open Offer
Qualifying Non-CREST Shareholders wishing to apply for Open
Offer Shares or the Excess Shares must complete the accompanying
Application Form in accordance with the instructions set out in
paragraph 3 of Part V of the Circular and on the accompanying
Application Form and return it, together with the appropriate
payment in the envelope provided to the Receiving Agent, to Neville
Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West
Midlands B63 3DA, United Kingdom so as to arrive no later than
10.00 a.m. on 26 April 2018.
If you do not wish to apply for any Open Offer Shares under the
Open Offer, you should not complete or return the Application Form.
Shareholders are nevertheless requested to complete and return the
Form of Proxy.
If you are a Qualifying CREST Shareholder, no Application Form
will be sent to you. Qualifying CREST Shareholders will have Open
Offer Entitlements and Excess CREST Open Offer Entitlements
credited to their stock accounts in CREST. You should refer to the
procedure for application set out in paragraph 3 of Part V of the
Circular. The relevant CREST instructions must have settled in
accordance with the instructions in paragraph 3.2 of Part V of the
Circular by no later than 10.00 a.m. on 26 April 2018.
Qualifying CREST Shareholders who are CREST sponsored members
should refer to their CREST sponsors regarding the action to be
taken in connection with the Circular and the Open Offer.
15. Overseas Shareholders
Information for Overseas Shareholders who have registered
addresses outside the United Kingdom or who are citizens or
residents of countries other than the United Kingdom appears in
paragraph 6 of Part V of the Circular, which sets out the
restrictions applicable to such persons. If you are an Overseas
Shareholder, it is important that you pay particular attention to
that paragraph of the Circular.
16. Additional information
The attention of Shareholders is drawn to the additional Open
Offer information contained in Parts IV and V of the Circular.
17. Importance of the Resolutions
The Directors 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. Completion of the Debt for Equity Swap pursuant to the
Scheme would result in the capitalisation of US$557.0 million in
aggregate principal amount of 2023 Notes and approximately US$81.0
million in interest expense savings per year. Adoption of the 2021
90% Proposed Amendments, pursuant to the 2021 Consent
Solicitations, would result in interest expense savings of
approximately US$11.0 million per year, as a result of the
elimination of the margin increase and assuming the Company pays
interest at 9 per cent. on the 2021 Notes for all remaining
interest periods.
It should be noted that the Proposals are subject to various
conditions, including the passing of the Resolutions at the General
Meeting. There is, therefore, no certainty that the Restructuring
and the Open Offer will proceed.
Shareholders should be aware that if the Restructuring does not
complete by 30 April 2018, the Company will default on its bond
interest payable under the existing bond indentures.
Furthermore, if the Restructuring completes but the Company is
unable to raise Additional Funds of at least US$50 million and
secure US$40 million infrequently recurring revenue in pipeline by
30 June 2018 then based on the projected cash flows of the Group,
the Company will, within the 3 months following 30 June 2018, be
highly likely to be unable to pay its creditors, as and when they
fall due for payment.
In the event that the Company is unable to meet such obligations
as a result of the failure of the Restructuring to complete or the
failure to raise sufficient Additional Funds, the Directors would
likely seek to place the Company into some form of insolvency
proceeding, or a creditor may take action to enforce or initiate an
insolvency proceeding. Any such proceeding would be likely to
result in little or no value for Shareholders.
Paragraph 18 below sets out the recommendations of the
Independent Directors and the Directors in relation to the
Resolutions. In compliance with Note 4 to Rule 25.2 of the Takeover
Code, Craig Chobor, Peter Reed, Michael Leitner have not
participated in the Independent Directors' recommendation of the
Whitewash Resolution as they are considered to have conflicts of
interest as a result of Mr Chobor's employment with Solus, Mr
Reed's directorship of Great Elm Capital Management, Inc. (the
investment manager of certain underlying funds which are 2023 Note
Holders participating in the Debt for Equity Swap) and Mr Leitner's
partnership of Tennenbaum Capital Partners, LLC (the investment
manager of certain underlying funds which are 2023 Note Holders
participating in the Debt for Equity Swap).
18. Recommendation
The Independent Directors, who have been so advised by Cenkos,
consider the Restructuring, the Open Offer and the Rule 9 Waiver to
be fair and reasonable and in the best interests of the Independent
Shareholders and the Company as a whole. Accordingly, the
Independent Directors unanimously recommend that Independent
Shareholders vote in favour of the Whitewash Resolution to be
proposed at the General Meeting.
The Independent Directors and their immediate families and
connected persons (within the meaning of section 252 of the Act)
who hold Ordinary Shares have confirmed their intention to vote in
favour of the Whitewash Resolution in respect of their beneficial
holdings which, in aggregate, total 1,698,422 Existing Ordinary
Shares, representing 1.05 per cent. of the existing issued share
capital of the Company as at the date of the Circular.
The Directors consider the Restructuring and the Open Offer to
be fair and reasonable and in the best interests of the Company and
its Shareholders as a whole and accordingly unanimously recommend
that Shareholders vote in favour of the Restructuring Resolutions
and the Open Offer Resolutions to be proposed at the General
Meeting.
The Directors and their immediate families and connected persons
(within the meaning of section 252 of the Act) who hold Ordinary
Shares have confirmed their intention to vote in favour of the
Restructuring Resolutions and the Open Offer Resolutions, being
proposed at the General Meeting in respect of their beneficial
holdings which, in aggregate, total 1,698,422 Existing Ordinary
Shares, representing 1.05 per cent. of the existing issued share
capital of the Company as at the date of the Circular.
Paul Walsh
Chairman
PROPOSED DEBT FOR EQUITY SWAP STATISTICS
Aggregate principal amount of 2023 Notes to US$557,035,832
be exchanged for Exchange Shares
Effective issue price of the Exchange Shares* 11.225 pence
Number of Exchange Shares being issued pursuant
to the Debt for Equity Swap 1,999,676,704
PROPOSED OPEN OFFER STATISTICS
Issue Price 11.225 pence
Open Offer basic entitlement 5 Open Offer Shares
for every
21 Existing Ordinary
Shares
Number of Open Offer Shares (in aggregate)** up to 38,603,797
Maximum gross proceeds of the Open Offer** GBP4.33 million
Open Offer Basic Entitlements ISIN GB00BFZWW109
Open Offer Excess Entitlements ISIN GB00BFZWW216
SUMMARY OF THE DEBT FOR EQUITY SWAP AND THE OPEN OFFER
Issue Price 11.225 pence
Number of Existing Ordinary Shares in issue
on the Record Date 162,135,949
Total number of New Ordinary Shares** 2,038,280,501
Number of Ordinary Shares in issue following
Admission of the Exchange Shares 2,161,812,653
Percentage of the issued ordinary share capital 92.5 per cent.
of the Company on the Restructuring Effective
Date following completion of the Debt for Equity
Swap represented by the Exchange Shares
Maximum number of Ordinary Shares in issue following
Admission of the Open Offer Shares** 2,200,416,450
Percentage of the existing issued ordinary share 23.81 per cent.
capital of the Company being issued pursuant
to the Open Offer following the Restructuring
Effective Date**
Percentage of the existing issued ordinary share 1,257.1 per cent.
capital of the Company being issued pursuant
to the Debt for Equity Swap and the Open Offer**
Estimated expenses of the Open Offer GBP0.01 million
Estimated net proceeds of the Open Offer receivable GBP4.32 million
by the Company**
Market capitalisation at Admission of the New GBP247.0 million
Ordinary Shares at the Issue Price***
* Being the closing middle market price per Existing Ordinary
Share on 5 April 2018, being the last practicable date before the
date of the Circular.
** Assuming that the Exchange Shares have been issued and
assuming take-up in full of the Open Offer by Qualifying
Shareholders.
*** Assuming that the Exchange Shares have been issued and
assuming take-up in full of the Open Offer by Qualifying
Shareholders and before the issue of any Ordinary Shares pursuant
to the exercise of options.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2018
Record Date for entitlement under the Open Offer 6.00 p.m. on 5
April
Announcement of the Open Offer, publication 9 April
of the Circular, Form of Proxy and, in respect
of Qualifying Non-CREST Shareholders, the Application
Form
Ex-entitlement Date of the Open Offer 8.00 a.m. on 9
April
Open Offer Entitlements and Excess Open Offer 10 April
Entitlements credited to stock accounts in CREST
of Qualifying CREST Shareholders
Latest recommended time and date for requested 4.30 p.m. on 20
withdrawal of Basic Open Offer Entitlements April
and Excess CREST Open Offer Entitlements from
CREST
Latest time and date for depositing Open Offer 3.00 p.m. on 23
Entitlements and Excess CREST Open Offer Entitlements April
in CREST
Latest time and date for receipt of Forms of 10.00 a.m. on 23
Proxy and CREST voting instructions April
Latest time and date for splitting Application 3.00 p.m. on 24
Forms (to satisfy bona fide market claims only) April
General Meeting 10.00 a.m. on 25
April
Results of General Meeting and Restructuring 25 April
announced
Restructuring Effective Date ASAP after the
conditions to the
Restructuring have
been satisfied
Admission and dealings in the Exchange Shares 8.00 a.m. on 26
expected to commence on AIM April
Latest time and date for receipt of Application 10.00 a.m. on 26
Forms and payment in full under the Open Offer April
and settlement of relevant CREST instructions
(as appropriate)
Where applicable, expected date for CREST accounts 26 April
to be credited in respect of Exchange Shares
in uncertificated form
Admission and dealings in the Open Offer Shares 8.00 a.m. on 27
expected to commence on AIM April
Where applicable, expected date for CREST accounts 30 April
to be credited in respect of Open Offer Shares
in uncertificated form
Where applicable, expected date for despatch within 10 business
of definitive share certificates for Exchange days of 26 April
Shares in certificated form
Where applicable, expected date for despatch within 10 business
of definitive share certificates for Open Offer days of 30 April
Shares in certificated form
Longstop Date 30 April or as
may be amended
in accordance with
the terms of the
Scheme.
Notes:
1. Each of the above times and/or dates is subject to change at
the absolute discretion of the Company and Cenkos. If any of the
above times and/or dates should change, the revised times and/or
dates will be announced through a Regulatory Information
Service.
2. All of the above times refer to London time unless otherwise
stated.
3. All events listed in the above timetable following the
General Meeting are conditional on the passing of the Resolutions
at the General Meeting.
DEFINITIONS
The following definitions apply throughout this Announcement,
the Circular, the Form of Proxy and the Application Form unless the
context otherwise requires:
"2021 90% Proposed has the meaning given to it in paragraph B
Amendments" of Part II of the Circular
"2021 Consent Solicitations" means the solicitation of consents from the
2021 Note Holders to approve the 2021 90% Proposed
Amendments and the Majority Proposed Amendments
and Proposed Waiver with respect to the 2021
Notes
"2021 Note Holders" means the holders of the outstanding 2021 Notes
"2021 Notes" means the 10%/15% Senior Secured Notes due
2021 issued by the Company pursuant to the
2021 Notes Indenture
"2021 Notes Indenture" means the indenture, dated as of 26 January
2017, as amended and restated as of 23 March
2017 and as further supplemented by a first
supplemental indenture dated as of 29 June
2017, a second supplemental indenture dated
as of 30 June 2017, a third supplemental indenture
dated as of 27 October 2017, a fourth supplemental
indenture dated as of 8 February 2018 and a
fifth supplemental indenture dated as of 8
February 2018, and to be amended further by
a sixth supplemental indenture among, inter
alios, the Company as issuer, The Bank of New
York Mellon, London Branch as trustee and primary
security agent and Wilmington Trust (London)
Limited as secondary security agent, under
which the 2021 Notes were issued, as supplemented,
amended and restated from time to time
"2023 Consent Solicitations" means the solicitation of consents from the
2023 Note Holders to approve the 2023 Jurisdiction
Proposed Amendments and the Majority Proposed
Amendments and Proposed Waiver with respect
to the 2023 Notes
"2023 Jurisdiction has the meaning given to it in paragraph D
Proposed Amendments" of Part II of the Circular
"2023 Note Holders" means the holders of the outstanding 2023 Notes
"2023 Notes" means the 12%/17.5% Senior Secured Notes due
2023 issued by the Company pursuant to the
2023 Notes Indenture
"2023 Notes Indenture" means the indenture, dated as of 3 October
2013, as amended and restated as of 23 March
2017 and as further supplemented by a first
supplemental indenture dated as of 30 June
2017, and a second supplemental indenture dated
as of 27 October 2017, a third supplemental
indenture dated as of 8 February 2018 and a
fourth supplemental indenture dated as of 8
February 2018, among, inter alios, the Company
as issuer, The Bank of New York Mellon, London
Branch as trustee as trustee and primary security
agent and Wilmington Trust (London) Limited
as secondary security agent, under which the
2023 Notes were issued, as supplemented, amended
and restated from time to time
"Act" the Companies Act 2006 (as amended)
"Additional Funds" means certain additional funds being targeted
by the Company, being:
(a) an additional draw down of up to US$14.5
million under the Super Senior Facility subject
to agreement by HPS Investment Partners, LLC;
(b) an additional draw down of up to US$30
million under the 2021 Notes as permitted under
the proposed 2021 Notes Indenture, conditional
upon completion of the Restructuring;
(c) the non-underwritten Open Offer for up
to EUR5 million, conditional upon completion
of the Restructuring; and/or
(d) a proposed equity placing of up to US$30
million being considered post the completion
of the Restructuring.
"Admission" means:
(a) in the case of the Exchange Shares, admission
to trading on AIM of the Exchange Shares becoming
effective in accordance with Rule 6 of the
AIM Rules; and
(b) in the case of the Open Offer Shares, admission
to trading on AIM of the Open Offer Shares
becoming effective in accordance with Rule
6 of the AIM Rules
"AIM" the AIM Market operated by the London Stock
Exchange
"AIM Rules" the AIM Rules for Companies published by the
London Stock Exchange from time to time
"Application Form" the application form for use by Qualifying
Non-CREST Shareholders in connection with the
Open Offer
"certificated form" an Ordinary Share recorded on a company's share
or "in certificated register as being held in certificated form
form" (namely, not in CREST)
"Company" or "Avanti" Avanti Communications Group plc, a company
incorporated and registered in England and
Wales under the Companies Act 1985 with registered
number 06133927
"connected person" as defined in in section 252 of the Act
"Consenting Holders" the Note Holders representing approximately
80 per cent. of the outstanding 2021 Notes
and 71 per cent. of the outstanding 2023 Notes
"Consenting Shareholders" Shareholders representing 36 per cent. of the
Company's Existing Ordinary Shares
"Court" the High Court of Justice in England and Wales
"Court Hearing" the hearing of the Court of the application
to sanction the Scheme and to make the Scheme
Sanction Order
"CREST" the relevant system (as defined in the CREST
Regulations) in respect of which Euroclear
is the operator (as defined in those regulations)
"CREST Regulations" the Uncertificated Securities Regulations 2001
(S.I. 2001 No. 3755)
"Dealing Day" a day on which the London Stock Exchange is
open for business in London
"Debt for Equity the proposed debt for equity swap of all of
Swap" the Company's outstanding 2023 Notes for the
Exchange Shares pursuant to the Scheme
"Directors" or "Board" the directors of the Company whose names are
set out on page 7 of the Circular, or any duly
authorised committee thereof
"Enlarged Share the issued Ordinary Shares immediately following
Capital" Admission of the Exchange Shares and the Open
Offer Shares (assuming all of the Open Offer
Shares are issued but assuming no further Ordinary
Shares are issued (whether pursuant to the
Share Option Schemes or otherwise))
"Euroclear" Euroclear UK & Ireland Limited, the operator
of CREST
"Excess Application the arrangement pursuant to which Qualifying
Facility" Shareholders may apply for additional Open
Offer Shares in excess of their Open Offer
Entitlement in accordance with the terms and
conditions of the Open Offer
"Excess CREST Open in respect of each Qualifying CREST Shareholder,
Offer Entitlements" the entitlement (in addition to his Open Offer
Entitlement) to apply for Open Offer Shares
pursuant to the Excess Application Facility,
which is conditional on him taking up his Open
Offer Entitlement in full and which may be
subject to scaling back in accordance with
the provisions of the Circular
"Excess Open Offer an entitlement for each Qualifying Shareholder
Entitlements" to apply to subscribe for Open Offer Shares
in addition to his Open Offer Entitlement pursuant
to the Excess Application Facility which is
conditional on him taking up his Open Offer
Entitlement in full and which may be subject
to scaling back in accordance with the provisions
of the Circular
"Excess Shares" Open Offer Shares applied for by Qualifying
Shareholders under the Excess Application facility
"Exchange Shares" the 1,999,676,704 new Ordinary Shares to be
issued pursuant to the Debt for Equity Swap
"Ex-entitlement the date on which the Existing Ordinary Shares
Date" are marked "ex" for entitlement under the Open
Offer, being 9 April 2018
"Existing Ordinary the 162,135,949 Ordinary Shares in issue at
Shares" the date of the Circular, all of which are
admitted to trading on AIM
"FCA" the UK Financial Conduct Authority
"Form of Proxy" the form of proxy for use in connection with
the General Meeting which accompanies the Circular
"FSMA" the Financial Services and Markets Act 2000
(as amended)
"General Meeting" the general meeting of the Company to be held
at The Bridewell Suite, Crowne Plaza London
- The City, 19 New Bridge Street, London EC4V
6DB at 10.00 a.m. on 25 April 2018, notice
of which is set out at the end of the Circular
"Group" the Company, its subsidiaries and its subsidiary
undertakings
"Independent Directors" means the Directors other than Craig Chobor,
Peter Reed and Michael Leitner
"Independent Shareholders" all Shareholders with the exception of Solus
(voting on behalf of the Solus Funds), Great
Elm Capital Management, Inc. (voting as investment
manager on behalf of its underlying funds),
Tennenbaum Capital Partners, LLC (voting as
investment manager on behalf of its underlying
funds) and any other Shareholders who are also
2023 Note Holders
"Issue Price" 11.225 pence per New Ordinary Share
"London Stock Exchange" London Stock Exchange plc
"Longstop Date" means the date on which the terms of the Scheme
will lapse if the Restructuring Effective Date
has not already occurred, being 30 April 2018
or such later date as may be agreed in accordance
with the terms of the Scheme
"Majority Proposed has the meaning given to it in paragraph C
Amendments and Proposed of Part II of the Circular
Waiver"
"Neville Registrars Neville Registrars Limited
Limited", "Registrars"
or "Receiving Agents"
"New Ordinary Shares" means together, the Exchange Shares and the
Open Offer Shares
"Nominated Adviser" Cenkos Securities plc, the Company's nominated
or "Cenkos" adviser and broker
"Note Holders" means the 2021 Note Holders and the 2023 Note
Holders
"Notes" means the 2021 Notes and the 2023 Notes
"Notice of General the notice convening the General Meeting which
Meeting" is set out at the end of the Circular
"Open Offer" the conditional invitation by the Company to
Qualifying Shareholders to apply to subscribe
for the Open Offer Shares at the Issue Price
on the terms and subject to the conditions
set out in the Circular and, in the case of
Qualifying Non-CREST Shareholders, in the Application
Form
"Open Offer Entitlement" the individual entitlements of Qualifying Shareholders
to subscribe for Open Offer Shares allocated
to Qualifying Shareholders pursuant to the
Open Offer
"Open Offer Resolutions" means resolutions numbered 4 and 5 in the Notice
of General Meeting
"Open Offer Shares" the up to 38,603,797 new Ordinary Shares to
be issued by the Company pursuant to the Open
Offer
"Ordinary Shares" ordinary shares of one penny each in the capital
of the Company
"Overseas Shareholders" Shareholders with a registered address outside
the United Kingdom
"Profit Forecast" means the profit forecast contained in Section
A of Part VI of the Circular
"Proposals" together, the Restructuring, the Rule 9 Waiver,
the Open Offer and Admission
"Prospectus Rules" the prospectus rules made by the FCA pursuant
to section 73A of the FSMA
"Qualifying CREST Qualifying Shareholders holding Existing Ordinary
Shareholders" Shares in uncertificated form
"Qualifying Non-CREST Qualifying Shareholders holding Existing Ordinary
Shareholders" Shares in certificated form
"Qualifying Shareholders" holders of Existing Ordinary Shares on the
register of members of the Company at the Record
Date but excluding any Overseas Shareholder
who has a registered address in any Restricted
Jurisdiction
"Record Date" 6.00 p.m. on 5 April 2018
"Regulatory Information a service approved by the FCA for the distribution
Service" to the public of regulatory announcements and
included within the list maintained on the
FCA's website
"Resolutions" the resolutions set out in the Notice of General
Meeting
"Restricted Jurisdiction" means the United States, Australia, Canada,
the Republic of South Africa, Japan and any
other jurisdictions where the offer, sale,
distribution, take-up or transfer of the Open
Offer Shares or the Exchange Shares, as applicable,
would constitute a breach of local securities
laws or regulations
"Restructuring" the restructuring of the Group's indebtedness
to be implemented pursuant to the Restructuring
Agreement, and as more particularly described
in Part II of the Circular
"Restructuring" the lock-up and restructuring agreement dated
Agreement 13 December 2017 (as amended from time to time)
between the Company and the Note Holders and
Shareholders party thereto, as more particularly
described in paragraph 6.1(b) of Part VIII
of the Circular
"Restructuring Effective the date upon which all the steps required
Date" to implement the Restructuring have occurred
"Restructuring Resolutions" means resolutions numbered 2 and 3 in the Notice
of General Meeting
"Rule 9" Rule 9 of the Takeover Code
"Rule 9 Waiver" the waiver agreed by the Panel and to be approved
or "Whitewash" by the Independent Shareholders of the obligation
to make a general offer pursuant to Rule 9
that would otherwise fall upon Solus as a result
of the issue and allotment to the Solus Funds
of Exchange Shares pursuant to the Debt for
Equity Swap and/or Open Offer Shares pursuant
to the Open Offer
"Scheme" means the scheme of arrangement pursuant to
Part 26 of the Act to implement the Debt for
Equity Swap
"Scheme Meeting" means the meeting of the 2023 Note Holders
to consider and vote upon the Scheme with respect
to the Debt for Equity Swap
"Scheme Sanction the order of the Court to sanction the Scheme
Order" pursuant to section 899 of the Act
"Share Option Schemes" means the following share option schemes operated
by the Company: Long Term Incentive Plan; Unapproved
share option plan (March 2010); Unapproved
share option plan (July 2010); Unapproved share
option plan (October 2010); Unapproved share
option plan (April 2011); Unapproved share
option plan (July 2011); Unapproved share option
plan (October 2011); Unapproved share option
plan (October 2011) key management personnel;
Unapproved share option plan (March 2012);
Unapproved share option plan (April 2012);
Long Term Incentive Plan ('LTIP') (July 2013);
Unapproved share option plan (October 2013);
Unapproved share option plan (May 2014); and
the Unapproved share option plan (May 2015)
"Shareholders" holders of Ordinary Shares
"Solus" Solus Alternative Asset Management LP
"Solus Funds" Sola Ltd, Ultra Master Ltd, Solus Senior High
Income Fund LP, Solus Opportunities Fund 5
LP and Ultra NB LLC.
"Super Senior Facility" has the meaning given to it in paragraph 6.1(e)
of Part VIII of the Circular
"Takeover Code" the City Code on Takeovers and Mergers, issued
by the Panel from time to time
"Takeover Panel" the Panel on Takeovers and Mergers
or "Panel"
"UK" the United Kingdom of Great Britain and Northern
Ireland
"US" or "United the United States of America, each State thereof,
States" its territories and possessions (including
the District of Columbia) and all other areas
subject to its jurisdiction
"uncertificated" an Ordinary Share recorded on a company's share
or "in uncertificated register as being held in uncertificated form
form" in CREST and title to which, by virtue of the
CREST Regulations, may be transferred by means
of CREST
"Whitewash Resolution" the ordinary resolution (to be taken on a poll)
of the Independent Shareholders concerning
the waiver of obligations under Rule 9 of the
Takeover Code to be proposed to the General
Meeting in connection with the issue and allotment
of Exchange Shares to the Solus Funds in connection
with the Debt for Equity Swap and, if the Solus
Funds participate in the Open Offer, the issue
and allotment of Open Offer Shares to the Solus
Funds in connection with the Open Offer, and
set out as resolution 1 in the notice of General
Meeting
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCMMGGDDLLGRZG
(END) Dow Jones Newswires
April 09, 2018 03:25 ET (07:25 GMT)
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