Mexican satellite operator Satmex’s second lien creditors are considering backstopping a new equity issue that would raise enough money to take out the company’s first lien noteholders and fund its new Satmex 8 spacecraft, SatelliteFinance understands….
Mexican satellite operator Satmex’s second lien creditors are considering backstopping a new equity issue that would raise enough money to take out the company’s first lien noteholders and fund its new Satmex 8 spacecraft, SatelliteFinance understands. The beleaguered company entered into a definitive agreement with Space Systems Loral earlier this year to manufacture the new satellite, which will cost around US$350m in total. In order to proceed with the satellite’s construction, the holders of Satmex’s debt – comprising US$238.2m of First Priority Senior Secured Notes that mature next year and US$175m in Second Priority Senior Secured Notes due 2013 – waivered a cap on expenditure to allow payment of up to US$100m. The waiver followed a decision by senior bondholders in March to reject an initial takeover bid by EchoStar. If it went ahead, the equity issue plan would enable the company to overcome a significant impediment to its future business strategy and would again open up the possibility of a potential future sale. However, any deal needs to get past another major obstacle in the form of the Mexican government, which continues to own a significant chunk of the company. This issue, though, may be getting closer to be resolved with Mexico’s Communications and Transportation (SCT) secretary, Juan Francisco Molinar Horcasitas, telling a conference in late October that the government was planning on selling its 20% stake in Satmex once the debt restructuring has been completed and the state has its own spacecraft. Speaking at the 2010 Convention of the National Electronics, Telecommunications and ICT Chamber (Canieti) in Mexico, Horcasitas insisted his government was not planning to undertake any financial rescue of the company. The Mexican government has other legal instruments at hand to prevent the country from losing its prized orbital slots and satellite connection services in the event of Satmex’s collapse, he said. “There is no time period for considering the [restructuring] proposal and although a deadline could be imposed, we are allowing the negotiation processes to go ahead; if this is accepted by the bond holders and creditors and is well executed, the company can be restructured”, he added. According to SCT figures, Satmex requires a least US$1.1bn to become an economically viable company. To further the Mexican government’s aspirations for its own satellites, President Felipe Calderón announced in early October that it is to order three new geostationary spacecraft, which are expected to be launched by the end of 2012. The president did not disclose how much the satellites would cost, nor how they will be funded, but Molinar has earlier stated the project could be worth as much as US$1.5bn. This cost would be divided up over four years in what analysts say is likely to be the biggest single satellite project in Latin America for the next five years. Satmex has hired Lazard to review the company’s capital structure and assist its strategy in obtaining financing for the Satmex 8 bird. Perella Weinberg Partners had previously been hired by the operator to advise on its options, as well as its negotiations with its bondholders. Jefferies has been advising the ad hoc committee of bondholders on both the interest from EchoStar and the potential refinancing alternatives for the group.
