EchoStar Corporation has raised US$2bn from a bond offering that will be used to fund its US$2.17bn cash acquisition of Hughes Communications. The company upped the size of the financing by US$200m following strong demand.
Via its wholly-owned…
EchoStar Corporation has raised US$2bn from a bond offering that will be used to fund its US$2.17bn cash acquisition of Hughes Communications. The company upped the size of the financing by US$200m following strong demand.
Via its wholly-owned subsidiary, EH Holding Corporation (EHHC), EchoStar issued US$1.1bn in eight-year senior secured notes and US$900m in ten-year senior unsecured notes in a private placement to institutional investors. Both the secured and the unsecured notes were upped in size by US$100m.
The secured notes priced at 100% of their value to yield 6.5% while the unsecured notes also priced at par and will yield 7.625%. The offering is expected to close on 1 June 2011, subject to customary conditions.
The notes will replace the US$1.8bn bridge financing commitment that Deutsche Bank, which is the sole bookrunner for the bond offering, provided to EchoStar to fund the Hughes takeover. The bridge consisted of a US$1bn senior secured bridge loan and a US$800m senior unsecured bridge financing.
EHHC was formed in March 2011 to act as the buy out vehicle for EchoStar’s purchase of Hughes Communications.
Once the company has received regulatory approval, including the FCC transferring certain satellite operating licences, then Hughes will merge with EHHC.
EchoStar stated that, under the terms of the transaction, it is required to ensure that EHHC has a cash balance of US$300m subsequent to the acquisition. This money, along with net proceeds from the bond offering and existing cash balances, will be used to fund the purchase.
Of the US$2.17bn cash consideration being paid for Hughes, US$1.37bn has been allocated for Hughes’ 22.6 million common shares while US$800m is for the settlement of the company’s debt, including accrued interest. The only Hughes debt that will remain is the US$115m Coface-backed loan facility from BNP Paribas and Societe Generale that is being used to help fund the launch of Hughes’ next-generation Ka-band broadband satellite Jupiter, which is scheduled to be launched by Arianespace in the first half of 2012.
Prior to the takeover, Hughes’ majority shareholder was the private equity group Apollo Management with a 57% stake.
Apollo, which is set to net just over US$750m from the deal, originally acquired a 50% holding for just US$55.6m from DirecTV back in 2004.