What? Newsat Limited (ASX: NWT) shares have been in a trading halt since 26 March and investors should brace for another two weeks, at least, of delays before they can offload shares in the struggling company.
On Wednesday the satellite company provided the market with a 'corporate and JABIRU-1 update' following the resignation of the Company's Chief Financial Officer and Company Secretary over the last week.
So What? 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 additional equity will need to be raised, which would significantly dilute existing shareholders in the $90 million company.
Wednesday's announcement detailed that Newsat'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.
Is NewSat Doomed?
Well, I believe there's still a fair bit of water to go under the bridge and, while the announcement was quite sombre, I view the ongoing discussions as a positive development.
The one thing that is certain is that shareholders will either be diluted or lose their stakes in the business. NewSat, all going well, will have to raise up to $100 million through either new funding sources or a highly dilutive rights issue.
The risk is high, and I have no idea of the upside potential, making NewSat an extremely odd proposition and something which most investors should avoid. Even if I could buy shares now I would wait for more concrete evidence of a stable future before buying.
