Global satellite operator Intelsat has reduced the proposed size of its planned initial public offering by US$1bn. In a regulatory filing dated 11 March, the company amended the size of the offering from US$1.75bn to US$750m.
Dianne VanBeber,…
Global satellite operator Intelsat has reduced the proposed size of its planned initial public offering by US$1bn. In a regulatory filing dated 11 March, the company amended the size of the offering from US$1.75bn to US$750m.
Dianne VanBeber, Intelsat’s vice president of investor relations and communications, told SatelliteFinance that the reason for the reduction in the equity offering was primarily because of the increased ability of the company to reduce debt due to the significant cash proceeds that it will receive following the loss of Intelsat-27. She also cited the current attractive interest rate environment for bond issuances which represents a significant opportunity to lower interest costs through refinancing.
Intelsat-27 was classified a total loss after the failure of the Zenit-3SL rocket carrying it in early February 2013. The spacecraft was insured for US$406m due to it containing both a UHF payload and North Atlantic mobility beams.
The satellite’s replacement, Intelsat-27R, however, will carry neither of these features and will focus purely on providing broadcast and DTH capacity for services over the Americas. Intelsat’s Epic satellite IS-29e, which is currently being constructed by Boeing and scheduled to be launched in 2015, will contain the necessary mobility beams, while the UHF payload was built on speculation to supply government users and has no contractual requirement to be replaced.
As such, the cap ex requirements for Intelsat-27R are far smaller, only around US$50m in 2013, giving the company a sizeable cash pile with which to further delever.
Added to this is the circa US$80m in insurance proceeds from the partial claim made on Intelsat-19 after one of its two solar arrays failed to deploy following its launch back in May 2012.
An RfP has been sent out to satellite manufacturers for the Intelsat-27 replacement bird and a decision is likely to be made soon.
At the same time, the considerable investor demand in the buoyant bond markets has led to generationally low interest rates enabling Intelsat to refinance its bonds at much lower margins than previously possible.
Based upon the new filing size, the company appears to be targeting an initial post-IPO leverage of roughly 7.3 times debt/EBITDA, higher than its earlier target of closer to 7 times. A smaller-sized offering also would result in less dilution of the current ownership team, led by UK-based private equity firm BC Partners with a 71.9% holding. Other shareholders comprise US-based sponsor Silver Lake Group with 15.87% stake, while the remaining 12.23% is held by investors including Credit Suisse, Ridgemont Equity Partners (formerly BAML Capital Partners) and Intelsat management.
The satellite operator’s Intelsat Luxembourg subsidiary has around US$5bn of bonds that it needs to replace, and on 6 March it issued a call notice on US$915m of its 11.5%/12.5% senior PIK election notes due 2017 with the intention of redeeming them at 105.75% of the principal amount on 5 April. To fund this, Intelsat will seek to tap the bond markets in the interim.
While the timings of the refinancing programme and the IPO are not necessarily tied together, it is likely that forthcoming redemption is the primary focus of the company over the next month.
Intelsat first filed for an IPO on the New York Stock Exchange on 18 May 2012 through holding company Intelsat Global Holdings S.A., which will subsequently be renamed Intelsat S.A post-transaction.
Goldman Sachs, JP Morgan and Morgan Stanley are the arrangers and underwriters for the flotation, while the company’s majority 71.9% shareholder, the private equity firm BC Partners, has engaged Evercore to provide financial advice on certain aspects of the transaction.
Changes at the top
Intelsat has reshuffled its management team with its deputy chairman and chief executive officer, David McGlade, to become chairman and CEO from 1 April.
At the same time, Intelsat’s executive vice president, sales, marketing and strategy Stephen Spengler has been promoted to president and chief commercial officer. Spengler has been with Intelsat since 2003 and will continue his current duties including the oversight of Intelsat General.
Phillip Spector, Intelsat’s general counsel and executive vice president, business development since 2005, will now move to a new role as a member of Intelsat’s Board of Directors.
Spengler will take on his business development responsibilities while Michelle Bryan has been appointed to the position of EVP, general counsel and chief administrative officer. Bryan previously served as general counsel of US Airways Group and Laidlaw International. Bryan joined Laidlaw in the autumn of 2003 as it became a U.S. SEC filer, and prepared the company for its 2004 listing on the NYSE.
In other executive changes, Thierry Guillemin was promoted from senior vice president to executive vice president and chief technical officer.
