Intelsat has raised US$1bn through the issue of 10-year senior notes via its subsidiary Intelsat Jackson. Credit Suisse was lead manager on the deal with Barclays, Deutsche Bank and Morgan Stanley joint bookrunners.
The notes carry a coupon of 7.25% and…
Intelsat has raised US$1bn through the issue of 10-year senior notes via its subsidiary Intelsat Jackson. Credit Suisse was lead manager on the deal with Barclays, Deutsche Bank and Morgan Stanley joint bookrunners.
The notes carry a coupon of 7.25% and priced at par. Terms are substantially similar to Intelsat Jackson’s outstanding 8.5% senior notes due 2019, which were issued in October 2009.
Proceeds from the offering are predominantly to be used to fund a cash tender offer to buy back approximately US$783m of its senior debt. The remainder is to be used for general corporate purposes, including the potential repayment or redemption of the company’s other debt.
Intelsat is seeking to purchase all of subsidiary Intelsat Corp’s outstanding US$658.1m 9.25% senior secured notes, due 2014, and its US$125m 6.875% senior secured debentures, due 2028.
The company offered holders who validly tendered their notes by 29 September a cash consideration of US$1,035 per US$1,000 principal amount of the 2014 notes and US$1,200 per US$1,000 principal amount of the 2028 notes. Those note holders who tender their debt after this date but before the expiration date, currently expected to be 15 October 2010, will receive US$1,005 per US$1,000 principal amount of the 2014 notes and US$1,160 per US$1,000 principal amount of the 2028 notes.
In order to undertake the buy back, Intelsat needed to secure consent from the note holders to amend certain restrictive covenants and events of default. On 30 September the company announced that it has received the requisite consents.
Credit Suisse is the dealer manager and solicitation agent for the 2014 tender offer and Deutsche Bank dealer manager and solicitation agent for the 2028 tender offer.
Intelsat’s strong bond with debt market
As with previous Intelsat bond issues, the offering was an opportunistic one taking advantage of the current buoyant investor demand in the high yield bond markets. Speaking on the investment banker panel at Euroconsult’s World Satellite Business Week, Fred Turpin, managing director at JP Morgan, said that it is currently a very favourable time for FSS operators to tap the high-yield bond markets. Turpin said: “I think the market conditions for satellite financing are about as good as they’ve ever been.”
Commenting on the possibilities in the bond market, Intelsat CFO Michael McDonnell told SatelliteFinance that there is always a trade off.
“The trade off for us is that the maturities are not imminent on our existing debt, they are good way out, and we have a lot of good covenant light paper at interest rates that are relatively attractive, so it can be very expensive to refinance that well in advance of maturity. So it is about debt that can be taken out economically. You have to pick your spots,” said McDonnell.
McDonnell added that the Intelsat continues to have a strong relationship with its existing noteholders. He said a number of the bond holders have invested throughout the company’s capital structure and that Intelsat has taken calls from creditors wanting to roll over their position if, as happened in this latest deal, Intelsat undertakes a refinancing.
While Intelsat’s debt structure is predominantly made up of bonds, the company also has well over US$3bn in bank loans and has considered diversifying its capital structure further by tapping export credit agencies.
McDonnell said: “It is something we have thought about and looked at. However, it seems like the kind of tool that is very well aligned to new companies without existing capital structures.” He added that there is a degree of economies of scale involved, with the need to commit to significant satellites orders with a specific manufacturer in order to take advantage of the benefits of ECA backing.
