EchoStar has not abandoned its attempt to take over Satmex, with the Mexican Communications and Transportation Secretary Juan Francisco Molinar Horcasitas releasing a statement that an accord has been reached between Satmex and EchoStar and which…
EchoStar has not abandoned its attempt to take over Satmex, with the Mexican Communications and Transportation Secretary Juan Francisco Molinar Horcasitas releasing a statement that an accord has been reached between Satmex and EchoStar and which involves the participation of all the shareholders. However, Horcasitas added that the agreement is still contingent on the fulfilment of a series of conditions that are currently being negotiated.
The price for Satmex still appears to be the sticking point, and it is believed that EchoStar refuses to increase its original offer of US$274m in cash combined with the repayment of US$107m of Satmex’s debt.
EchoStar’s previous approach collapsed in March after Satmex bondholders blocked the sale. At that time, EchoStar seemingly walked away from the deal for good, choosing instead to expand its Mexican presence through a new capacity deal with SES.
Bondholders agree to new Satmex satellite deal
The Satmex bondholders have since displayed their willingness to support Satmex through a waiver on certain covenants that has allowed the Mexican satellite operator to enter into a definitive agreement with Space Systems Loral for the construction of the Satmex 8 spacecraft.
The total cost of Satmex 8 will be around US$350m, and the agreement with Loral specifies that Satmex must make payments of around US$65m over the next five months.
This level of expenditure exceeds that permitted by the indentures governing its debt. Satmex therefore obtained waivers to proceed from the holders of its debt – the US$238.2m First Priority Senior Secured Notes which mature in 2011 and the US$175m Second Priority Senior Secured Notes due 2013.
The waivers allow Satmex to enter into definitive agreements for the manufacture and launch of Satmex 8, and the payment of up to US$100m in connection to this.
One condition of the waiver is that the interest payable on its First Priority Notes has been increased from 8.75% plus LIBOR to 9.25% plus LIBOR.
Following the termination of the original EchoStar takeover bid, the only way the bondholders could improve their chances of securing any improved degree of recompense from Satmex was to work towards a new satellite.
The fact that the waiver only covers US$100m of the Satmex 8 costs suggests that the company will seek further financing to fund the project.
Satmex 8 will replace Satmex 5 and operate at the 114.9W orbital slot, where it will cover the USA and Latin America. It is expected to carry 64 transponders, across Ku-band and C-band.
