What? Various media outlets on Friday morning were reporting that Australian satellite company Newsat Limited (ASX: NWT) has been placed in administration by the trustee for its lenders, Citicorp International.
What does this mean?
It means bad news for Newsat Limited shareholders.
First, some history: In late January Newsat advised shareholders that progress payments to Lockheed Martin for the company's flagship Jabiru-1 satellite had become overdue as a result of the ongoing discussions with financiers to recommence funding.
At the time, Newsat's management believed that up to $60 million in addition equity would need to be raised, which would significantly dilute existing shareholders in the $90 million company.
Last week Newsat released an announcement saying that it's major lenders COFACE Lender Group and EX-IM Bank were not in favour of supporting a waiver to the group's breaches of the previous financing arrangements.
This had flow-on effects to Newsat's satellite manufacturer Lockheed Martin, which is continuing production despite late payments, and Arianespace, the launch provider, which has issued a 30-day termination notice and suspended activities under its launch services agreement.
Newsat released a statement on Friday confirming the news and the The Australian has reported that the administrators have filed for Chapter 15 bankruptcy protection in the US, while a court-supervised turnaround effort progresses in Australia.
The team in the US is scheduled to ask the US Bankruptcy Court to temporarily bar Lockheed Martin, Ariane Space and others from terminating the Jabiru-1-related contracts as this would surely be the end of NewSat.
What Now?
There's little that shareholders can do at the moment other than wait and see how the receivers go. The court supervised turnaround effort could see the parties come back and continue discussions. However, one must wonder what the major points of contention are between the lenders and NewSat seeing as there remains a number of pre-purchased contracts in place and the economics of the project appeared to stack up before the finance breach last year.