The satellite imaging provider GeoEye has arranged a US$215m financing deal with the private equity firm Cerberus Capital Management that will ensure it gains access to bid for EnhanceView, the US government’s new imaging procurement contract.
The…
The satellite imaging provider GeoEye has arranged a US$215m financing deal with the private equity firm Cerberus Capital Management that will ensure it gains access to bid for EnhanceView, the US government’s new imaging procurement contract.
The National GeoSpatial-Intelligence Agency (NGSIA) has specified that all parties bidding for government support in the building of a satellite to provide EnhanceView imagery must provide a letter of credit proving they have the necessary collateral to back such a project.
The agreement with Cerberus will allow GeoEye to commit to this letter of credit. Under this arrangement Cerberus would purchase 115,000 newly issued shares of preferred convertible stock at a price of US$1000 per share and an initial conversion price of US$30 per common share.
Total gross proceeds after original issue discount will total US$112.125m. This level of equity investment would give Cerberus a 15.4% stake in GeoEye. The conversion price can fall as low as US$25.55, but GeoEye will not allow any conversion that would allow Cerberus’s stake to reach 20% or higher.
The entire process is centred on whether the NGSIA will agree to back GeoEye with funding for a new satellite. If GeoEye is awarded an EnhanceView contract without the letter of credit then Cerberus will only have the option to purchase 80,000 preferred shares for US$78m.
GeoEye is also poised to issue senior unsecured notes worth US$100m, again to be purchased by Cerberus. If the company elects to pursue this course the senior notes will have a maturity of April 1 2016, at an interest rate of 8% plus three month LIBOR or a further 2%, depending on which is greater.
GeoEye was advised on the financial side of the arrangement by Convergence Advisors, and on the legal aspects by Houlihan Lokey.
GeoEye anticipates that the EnhanceView contract will be awarded in June this year. All proceeds from whatever combination of equity and debt issuance that goes forward will go towards the construction of the company’s next satellite, GeoEye-2.
GeoEye has selected Lockheed Martin to build the satellite, which will be launched in late 2012. Lockheed previously built GeoEye’s IKONOS spacecraft, which launched in 1999.
The Cerberus announcement coincided with the release of GeoEye’s results for 2009, which showed impressive growth. Revenue rose by 84.9% to US$271.1m from US$146.7m in 2008, while adjusted EBITDA rocketed to US$132.2m, a 232.9% increase on the previous year.
