Fundies prepare to give Speedcast both barrells

Just when small cap fund managers thought satellite owner Speedcast International couldn't disappoint any more, it has outed itself as a company hard up against its debt covenants and still rewarding management.

Chairman John Mackay is gone, so too chief financial officer Clive Cuthell. Chief executive Pierre-Jean Beylier is safe - for now - but will be in fundies' sights in coming days.

You could feel the anger in fundie land on Tuesday as Speedcast revealed its half-year numbers. It reiterated guidance reset less than two months ago, but it was a reminder of trickery around the edges that had investors fuming.

Speedcast CEO Pierre-Jean Beylier could be in for a few tough days. Kenneth Lim

It was clear Speedcast had had more success - and perhaps had pinned its hopes on - playing tricks with its debt covenants than improving the business.

Speedcast reminded investors that as part of an amendment to its loans secured on July 30, its primary covenant net debt-to-EBITDA had been increased to 4.5-times from 4-times, applicable from the end of this year.

And should it pay any dividends in the meantime, the covenant would drop back to 4-times.

All of which means there is now more headroom for debt - and not necessarily an onus on reducings its loans, as fundies would like to see. And investors know such a concession from the lenders would likely have cost a pretty penny.

But the real sting was at the bottom of page 16 in the half-year accounts, when shareholders were reminded that Speedcast's board had granted performance rights to the CEO, CFO and other management. In total, 3.6 million rights were issued with a nil exercise price.

Investors reckon it's hard to fathom why the rights were issued in light of the company's performance. They were approved by the board - chaired by Mackay, who has now resigned, effective immediately.

Speedcast shares dropped 33 per cent to $1.13 on Tuesday as some of the faithful lost faith.

It's one where the shorts have already grabbed a strong hold on the share register, and it only looks like getting tighter at least in the short term. The stock is down more than 80 per cent since this time last year.