THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) 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, 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 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.

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 £4.33 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 INDEPENDENT DIRECTORS’ RECOMMENDATION IS THAT THE INDEPENDENT SHAREHOLDERS VOTE IN FAVOUR OF RESOLUTION 1 AND THE DIRECTORS’ RECOMMENDATION 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 £4.33 million (assuming full take up of the Open Offer, but being less than the €5.0 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 £4.33 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 £4.33 million (assuming full take up of the Open Offer, but being less than the €5.0 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 £4.33 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.

  1. 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 to 31 December 2017 Year ended 30 June 2017 Year ended 30 June 2016 Year ended 30 June 2015
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 substantial modification of debt 219,203
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/.

  1. 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).

  1. 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 £4.33 million (before expenses) (assuming full take up of the Open Offer but being less than the €5 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 Existing Ordinary Shares Percentage of existing issued share capital Number of Ordinary Shares (following Admission)1 Percentage of Ordinary Shares (following Admission)1
Kyle Whitehill
Paul Walsh2 230,000 0.14% 234,107 0.01%
David Bestwick3 1,301,954 0.80% 1,325,203 0.06%
Peter Reed
Craig Chobor
Michael Leitner
Andrew Green4 21,888

 

0.01% 22,279 0.00%
Paul Johnson5 10,000 0.01% 10,179 0.00%
Richard Mastoloni
Christopher McLaughlin
Alan Harper
Nigel Fox6 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.

  1. Use of proceeds

The Directors intend that the net proceeds of the Open Offer of up to £4.32 million (assuming that the Open Offer is fully subscribed) will be used to fund general working capital requirements.

  1. 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.

  1. 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.

  1. 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.

  1. 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 £7,334,721.50 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 £1,100,208.23 (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.

  1. 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.

  1. 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.

  1. Additional information

The attention of Shareholders is drawn to the additional Open Offer information contained in Parts IV and V of the Circular.

  1. 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).

  1. 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 be exchanged for Exchange Shares US$557,035,832
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** £4.33 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 of the Company on the Restructuring Effective Date following completion of the Debt for Equity Swap represented by the Exchange Shares 92.5 per cent.
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 capital of the Company being issued pursuant to the Open Offer following the Restructuring Effective Date** 23.81 per cent.
Percentage of the existing issued ordinary share capital of the Company being issued pursuant to the Debt for Equity Swap and the Open Offer** 1,257.1 per cent.
Estimated expenses of the Open Offer £0.01 million
Estimated net proceeds of the Open Offer receivable by the Company** £4.32 million
Market capitalisation at Admission of the New Ordinary Shares at the Issue Price*** £247.0 million

 

* 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 of the Circular, Form of Proxy and, in respect of Qualifying Non-CREST Shareholders, the Application Form 9 April
Ex-entitlement Date of the Open Offer 8.00 a.m. on 9 April
Open Offer Entitlements and Excess Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Shareholders 10 April
Latest recommended time and date for requested withdrawal of Basic Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST 4.30 p.m. on 20 April
Latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements in CREST 3.00 p.m. on 23 April
Latest time and date for receipt of Forms of Proxy and CREST voting instructions 10.00 a.m. on 23 April
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) 3.00 p.m. on 24 April
General Meeting 10.00 a.m. on 25 April
Results of General Meeting and Restructuring announced 25 April
Restructuring Effective Date  ASAP after the conditions to the Restructuring have been satisfied
Admission and dealings in the Exchange Shares expected to commence on AIM 8.00 a.m. on 26 April
Latest time and date for receipt of Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate) 10.00 a.m. on 26 April
Where applicable, expected date for CREST accounts to be credited in respect of Exchange Shares in uncertificated form 26 April
Admission and dealings in the Open Offer Shares expected to commence on AIM 8.00 a.m. on 27 April
Where applicable, expected date for CREST accounts to be credited in respect of Open Offer Shares in uncertificated form 30 April
Where applicable, expected date for despatch of definitive share certificates for Exchange Shares in certificated form within 10 business days of 26 April
Where applicable, expected date for despatch of definitive share certificates for Open Offer Shares in certificated form within 10 business days of 30 April
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 Amendments” has the meaning given to it in paragraph B 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 Proposed Amendments” has the meaning given to it in paragraph D 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”

“Additional Funds”

the Companies Act 2006 (as amended)

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 €5 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” or “in certificated form” an Ordinary Share recorded on a company’s share register as being held in certificated 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 Swap” the proposed debt for equity swap of all of 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 Capital” the issued Ordinary Shares immediately following 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 Facility” the arrangement pursuant to which Qualifying 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 Offer Entitlements”     in respect of each Qualifying CREST Shareholder, 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 Entitlements” an entitlement for each Qualifying Shareholder 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 Date” the date on which the Existing Ordinary Shares are marked “ex” for entitlement under the Open Offer, being 9 April 2018
“Existing Ordinary Shares” the 162,135,949 Ordinary Shares in issue at 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 Amendments and Proposed Waiver”       has the meaning given to it in paragraph C of Part II of the Circular
“Neville Registrars Limited”, “Registrars” or “Receiving Agents”     Neville Registrars Limited
“New Ordinary Shares” means together, the Exchange Shares and the Open Offer Shares
“Nominated Adviser” or “Cenkos” Cenkos Securities plc, the Company’s nominated 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 Meeting” the notice convening the General Meeting which 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 Shareholders” Qualifying Shareholders holding Existing Ordinary Shares in uncertificated form
Qualifying Non-CREST Shareholders” Qualifying Shareholders holding Existing Ordinary 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 Service” a service approved by the FCA for the distribution 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” Agreement the lock-up and restructuring agreement dated 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 Date” the date upon which all the steps required 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” or “Whitewash” the waiver agreed by the Panel and to be approved 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 Order” the order of the Court to sanction the Scheme 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” or “Panel” the Panel on Takeovers and Mergers
“UK” the United Kingdom of Great Britain and Northern Ireland
“US” or “United States” the United States of America, each State thereof, its territories and possessions (including the District of Columbia) and all other areas subject to its jurisdiction
“uncertificated” or “in uncertificated form” an Ordinary Share recorded on a company’s share register as being held in uncertificated 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
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