Inmarsat has announced that it has secured a US$700m 12.5-year credit facility from the Export-Import Bank of the United States. Proceeds will be used to fund the construction of the Inmarsat-5 satellites by Boeing.
Under the terms of the agreement, the…
Inmarsat has announced that it has secured a US$700m 12.5-year credit facility from the Export-Import Bank of the United States. Proceeds will be used to fund the construction of the Inmarsat-5 satellites by Boeing.
Under the terms of the agreement, the facility will be drawn down gradually over the first 4 years and then it becomes a simple amortising term loan for a further 8.5 years. Inmarsat expects to begin drawing from the facility in the second quarter of this year and estimates that the fixed interest rate of the loan will be around 3.2%-3.3%.
The size of facility is higher than the US$666m originally envisioned and approved by ExIm as part of its structured finance lending for 2011. Inmarsat told SatelliteFinance that the reason for the increase was that Boeing revised the USsourced content higher than originally anticipated. The overall value of the Boeing Inmarsat-5 construction contract, however, has not changed.
Unlike the recent US$116.6m loan guarantee to Azerkosmos to fund the construction of Azersat-1 by Orbital Sciences, the loan to Inmarsat is a direct financing agreement making ExIm a senior secured creditor of Inmarsat Investments Ltd.
The debt is to rank pari passu with both Inmarsat’s existing senior credit facility and EIB Facility, and ahead of its 7.375% Senior Notes due 2017.
According to a source close to the deal, the loan is split into three tranches, one for each Inmarsat-5 and that under the terms of the debt, Inmarsat will pay Boeing first and then Ex-Im will reimburse the satellite operator on a quarterly basis with equivalent loan draw downs. To that end, only qualifying expenditure under the contract can be reimbursed with loan drawings so the loan cannot be used for any other purpose.
ING is believed to have advised Inmarsat on the ECA process.
SatelliteFinance understands that Thales Alenia Space had also bid for the Inmarsat-5 contract and had secured backing from the French export credit agency COFACE along with Credit Agricole but the satellite operator selected the Boeing proposal instead.
LightSquared deal bolsters profits
Inmarsat reported a 23% increase in its first quarter 2011 EBITDA to US$204.1m as the first revenues from Phase 2 of its spectrum leasing agreement with LightSquared were booked.
Revenues rose by 21% year-on-year to US$222.8m while free cash flow jumped sharply, up 71% to US$186.6m.
Andrew Sukawaty, Inmarsat’s chairman and chief executive, said, “During the quarter we saw strong overall revenue growth resulting from our Cooperation Agreement with LightSquared including the first revenues from Phase 2 of the agreement.
“The revenue performance of our core MSS business was in line with management expectations. New product sales continue to be very strong, but some usage trends and other factors continue to constrain our MSS growth. We continue to expect growth in our core MSS revenue for 2011 to be within our 2% to 4% range.” Under the terms of the Phase 2 agreement, Inmarsat will lease LightSquared some of its North American L-band spectrum at an annual cost of US$115m, increasing at a rate of 3% per year. LightSquared triggered this agreement back in February of this year.
For the Phase 1 spectrum cooperation agreement, the two parties are re-banding their L-band spectrum in order to give each more contiguous spectrum. Between August 2010 and March 2012, LightSquared is making a series of payments to Inmarsat for this, totalling of US$337.5m.
During the first quarter 2011, LightSquared paid Inmarsat US$16.4m and US$20.1m in relation to Phase 1 and 2, respectively.
