Australian satellite operator NewSat’s hopes of securing a resolution to its Jabiru-1 funding woes took a turn for the worse after it was informed that French export credit agency COFACE was not in favour of supporting its proposed waiver…
Australian satellite operator NewSat’s hopes of securing a resolution to its Jabiru-1 funding woes took a turn for the worse after it was informed that French export credit agency COFACE was not in favour of supporting its proposed waiver agreement.
In a filing to the Australian Securities Exchange, NewSat said that it was orally advised by members of the COFACE lender group, comprising Credit Suisse, Standard Chartered Bank and Societe Generale, that despite the ongoing negotiations, COFACE did not plan to agree to the terms of a formal waiver in respect of the 2014 breaches to the terms of the Jabiru-1 project financing.
NewSat defaulted on the debt in June 2014 after it breached the terms when it borrowed a US$10m unsecured short term loan from its shareholder Ever Tycoon Limited.
While NewSat has not received formal written advice from COFACE as to its position, its intention not to support a deal means that the lender group will not advance further funds under the COFACE-guaranteed credit facilities.
This in turn has lead to NewSat’s other lenders, predominantly the US Export Import Bank, stating that they also will not advance further funds so long as the COFACE lender group does not provide funds, or until an acceptable substitute funding source emerges.
The balance remaining to be drawn under the COFACE-guaranteed credit facilities is US$62m, while the balance with the other lenders is around US$160m.
The COFACE debt was to be used to fund NewSat’s launch contract with Arianespace. Having failed to make interim payments to the launch provider during the suspension of its funding, NewSat was issued with a termination notice. Unless it can restart payments by 30 May 2015, Arianespace has the right to terminate the agreement.
Jabiru-1’s manufacturer Lockheed Martin has also issued a notice of termination due to non-payment and while it has continued to progress with the construction of the spacecraft, it too can terminate the agreement unless a funding solution can be found.
A key part of any agreed waiver was for NewSat to raise at least US$30m in a rights issue. The company stated that it is also required to raise an additional US$50-US$70m during Q3 2015.
As a result of the current situation, NewSat has said that it is exploring options to raise these amounts and possibly more if necessary in order that its lending group will resume funding.
The company has hired a new financial adviser in Peter J Solomon Company to help with this task. NewSat said that PJSC has extensive experience in restructuring and recapitalizations, including negotiating with lender groups consisting of certain export credit agencies.
In addition, the company has moved quickly to replace its chief financial officer Linda Dillon with Mark Spragg, a senior managing director at business advisory firm FTI consulting.
Spragg, who will work on an interim basis, led the successful Globalstar restructuring transaction that involved COFACE and its lender group. He has also worked on a number of other struggling satellite projects including LightSquared, TerreStar and SkyBridge.
Dillon resigned from NewSat, effective 2 April, after only six months in the job. She was brought in to the company alongside two new independent directors as part of efforts to improve the satellite operator’s corporate governance.
Her role as company secretary has since been taken over by NewSat corporate counsel William Abbott.
Dillon’s last notable action for the company was to secure the voluntary suspension from trading of NewSat’s shares on ASX while it concluded the waiver negotiations.
With COFACE now intending not to support the planned waiver, NewSat considers that it should remain in voluntary suspension until there is clarity on the position of the lenders, Lockheed Martin and Arianespace.
