Lenders tipped to offload $890m worth of Speedcast debt
Expectations are mounting that lenders to telecommunications company Speedcast will offload their $US600m ($893m) Term Loan B market debt after shareholders sharply sold off the company last month on the back of its half-year loss.
Speedcast’s $US600m-odd Term Loan B loan and $US100m revolving credit facility has left the group with a debt ratio of 3.6 times.
The Term Loan B debt is collateralised, which makes it more liquid and the chances of a sale more likely, according to analysts. With net debt of about $625m, the hope of the company is to reduce its debt-to-earnings ratio to 2.5 times.
However, this week ratings agency Moody’s downgraded Speedcast’s credit rating to B1, from Ba3, and estimates its debt ratio will increase to 4.2 times for the 12 months to June.
It says that while the company’s liquidity remains adequate to meet its short-term cash needs, its liquidity buffers have narrowed, because of lower cash holdings and tighter headroom against financial covenants under its committed revolving credit facility.
The latest disappointing results came after earnings were in decline during 2018 and its market value is now $230m, after the company was worth about $1bn a year ago.
Speedcast sells access to satellites and observers in remote locations globally, mainly serving customers in the maritime, energy, enterprise and government segments and has been listed on the Australian Securities Exchange since 2014.
Analysts are upbeat about a turnaround of the company, as there is still underlying demand for its services, although they say it could take some time to reduce its debt.
During its results, Speedcast said that its half-year earnings before interest, tax, depreciation and amortisation was $66.8m, as it announced John Mackay would resign as chairman.
However, it downgraded its annual earnings guidance by about $20m, saying it expected between $140m and $150m of EBITDA for the 12-month period.
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