The ability of satellite operators, both established and new, to secure significant financial backing for their next generation projects continues unabated. Over the past couple of weeks, funding worth more than US$4bn has been committed, or is in the…
The ability of satellite operators, both established and new, to secure significant financial backing for their next generation projects continues unabated. Over the past couple of weeks, funding worth more than US$4bn has been committed, or is in the process of being secured, that will help pay for a series of new satellites, networks and services that will help shape the future direction of the industry.
This raft of investment has come from a variety of sources with export credit agencies, notably Coface, continuing to play a major role, while equity investment has been increasingly prevalent.
The largest completed fundraising so far is the US$1.8bn debt facility that Iridium finally secured at the beginning of October. As with previous Coface backed loans, the senior secured facility pays an extremely attractive interest rate and has a long tenor. Split into two pro rata tranches, the 14-year term loan bears a fixed interest rate of 4.96% and variable rate of 195bp over Libor, which currently equates to 2.41%. Like similar ECA backed financings, the terms of the debt facility dictate that the majority of the funds must be directly used to pay for the satellite construction contract.
Another satellite operator that has turned to the French export credit agency for assistance is O3b. The nascent company’s financing plan has taken somewhat longer to put together then originally anticipated but an end is finally in sight. A US$525m debt facility that is 95% guaranteed by Coface is set to be signed in the next couple of weeks, while a US$150m commercial mezzanine tranche and US$236m in new equity financing are also in place. As with Iridium, O3b’s new satellite constellation is being constructed by French satellite manufacturer Thales Alenia Space.
Unsurprisingly, hedge fund Harbinger Capital Partners remains busy in the satellite sector. In the same week that Iridium signed its facility, Harbinger’s satellite/terrestrial wireless broadband venture LightSquared revealed that it has secured a US$850m four-year loan via UBS. The loan, which carries an interest rate of 12%, was understood to be oversubscribed in syndication.
The company is also in talks with South Korean telecoms operator SK Telecom over a sizeable equity investment, although the amount and terms are still being negotiated.
LightSquared recently accelerated its spectrum leasing agreement with Inmarsat to the fourth quarter of this year as it seeks to ramp up the roll out of its LTE network to meet the stringent milestones set by the FCC.
The commencement of the spectrum agreement with Inmarsat is widely seen as a major reason for Harbinger’s other significant move this month, the sale of half its stake in Inmarsat. The logic follows that having secured the rights to the L-band spectrum it requires for the LightSquared network, Harbinger no longer had a strategic need to maintain its holding in Inmarsat.
The hedge fund generated proceeds of £410m from the share placement which rather than being funnelled into LightSquared, is expected to be returned to investors. As to whether Harbinger will retain its remaining 14% stake, contrary to market expectations that it will sell as soon as the 180 day lock-up period is over, CEO Phil Falcone suggested that it is happy to maintain a core position in the company. Whether this is just lip service will become apparent when the lock-up period ends.
It is not just ambitious new constellations and networks that have attracted investment. Russian satellite operator RSCC has just ordered three new satellites and has put in place ?208m of new debt financing to help. ?112.3m of this is via a Coface backed facility, while a ruble-denominated term loan makes up the remainder.
Meanwhile, fresh from being awarded contracts worth over US$3.5bn each, remote sensing operators GeoEye and DigitalGlobe have ordered next generation imaging satellites.
To help fund its bird, GeoEye raised US$78m via a previously agreed equity placement with private equity firm Cerberus Capital Management. However, the company’s fundraising plans did not stop there and it is currently in the market with a US$125m senior secured bond offering.
With private equity also increasingly looking to get back into the sector, as witnessed by Permira’s US$200m acquisition of ABS, and the continuing buoyant demand in the high yield bond markets, satellite operators are getting the green light from investors to push ahead with their ambitious plans.
