Lessons aplenty for Avanti’s enablers

avantiSatellite fleet operator Avanti Communications Group’s announcement that it may not meet its cash requirements and is looking for a buyer is bad news for everyone, including Avanti’s direct competitors in the European and African markets.

But some redemption might be found if London-based Avanti’s many enablers over the years take the opportunity to assess what lessons they should take away.

First, the good news: Unlike Australia’s NewSat, whose failure gave a black eye to the U.S. Export-Import Bank and to France’s Coface export-credit agency (ECA), the Avanti story shows Ex-Im and Coface in a positive light.

Avanti took out loans and guarantees totaling around $300 million from both export-credit agencies for its Hylas-2 satellite. But Avanti felt cramped by Ex-Im and Coface’s “overly restrictive” oversight of its business, as the company told its shareholders, and paid off the loans in advance.

For Hylas-4, Avanti avoided the ECAs and secured $300 million in loans. That satellite, under construction by Orbital ATK and scheduled for launch aboard Europe’s Ariane 5 rocket in 2017, may be Avanti’s most valuable asset at this point.

But burning through its cash at a time of slower-than-expected growth in its African market, Avanti said July 9 that it would seek export-credit agency support. The problem: As is their practice, these credit agencies set equity thresholds as a condition for their support.

In this case, an unnamed ECA — presumably Coface, given Ex-Im’s continued purgatory imposed by certain U.S. congressmen — demanded that Avanti raise $50 million to qualify for its backing.

So Ex-Im and Coface in this case appeared to be doing their jobs.

Whether the same can be said for the British government and the 22-nation European Space Agency  is not certain. For reasons of their own, the British government, including Britain’s OfCom telecommunications regulator, and ESA both ran interference for Avanti that in hindsight probably prolonged the company’s agony and may end up being costly to Avanti bondholders and investors.

To anyone following the radio-spectrum battles at the International Telecommunication Union in recent years, it was clear the British government had drunk a full measure of the Avanti Kool-Aid.

And why not? London’s investment climate and financial services sector were a source of pride in Britain, and Avanti’s announced ambition to break into Europe’s closed satellite was a compelling narrative.

But Avanti’s business model was never going to be easy even without the downturn in satellite bandwidth prices in Africa, and it’s worth asking whether U.K. authorities were aware of that.

It’s also worth asking whether London’s AIM exchange, on which Avanti stock is traded, should re-examine its risk-disclosure requirements.

ESA, too, viewed Avanti as a welcome event. Avanti arrived as the agency was developing an appetite for public-private partnerships.

Avanti’s Hylas-3 satellite carries a data-relay payload for ESA’s European Data Relay Service, for which Airbus Defence and Space is prime contractor. That reduced Avanti’s capital requirements. ESA also sold Avanti the aging Artemis data-relay satellite, the first time the agency has concluded such a deal.

ESA says public-private partnerships remove some financial and technical risks to stimulate new economic activity, but leave market risks to the commercial partners. That’s true, but now we have a situation in which ESA’s