NewSat defaults on $26m in overdue Lockheed payments

Lockheed Martin has issued NewSat with a termination notice over a failure to make US$21 million (A$26.5 million) in payments for the construction of NewSat's Jabiru-1 satellite.

NewSat has struggled to get the project off the ground since mid-last year, when it revealed funding for the satellite had been put on hold over "alleged technical or documentary breaches of financial facilities" related to the drawdown of a loan from Ever Tycoon.

It later reached agreement with its US and French financiers for a waiver, but was required to meet several conditions before funding of Jabiru-1 would commence.

NewSat was asked to review its accounts and implement new frameworks, reporting and processes; appoint three independent directors (approved by the financiers) to its board; and raise US$40 million in new equity before the end of 2014.

In the meantime, NewSat said it would continue to fund the construction of the satellite - which is being built by Lockheed Martin - out of its cash reserves. Debt funding was to recommence once NewSat met the terms of the waiver.

However NewSat today advised shareholders that Lockheed had issued a termination notice for the contract in response to overdue payments totalling US$21 million.

NewSat has now entered technical default, and has between 30 and 90 days to make payments without any further consequences.

The company blamed delays in the recommencement of debt funding for its inability to make the payments, and said it was meeting regularly with Lockheed to remedy the contract default.

"Now that Lockheed Martin has issued a termination notice there is an extended cure period in which the default can be remedied," the company advised.

"NewSat understands that Lockheed Martin is continuing with construction of the satellite at this time."

The company also today advised shareholders it was still unable to draw upon the financiers' funding.

It stressed the agreements had not been terminated and all parties remained in "continued discussions" on how to resolve the issues.

A spokesperson said NewSat had submitted its proposals to invest or underwrite up to US$60 million in equity to financiers last year before its November 30 deadline, and was awaiting approval.

NewSat has met all its conditions under the waiver, the spokesperson said, but the recommencement of debt funding was being held up by the Lockheed contract issues.

The company said it was confident that if debt funding is restarted and payments to Lockheed are made "shortly", the construction of Jabiru-1 would not be slowed or stopped and would meet the planned March to May 2016 launch window.