Global satellite operator Intelsat has announced that it has commenced the distribution of preliminary prospectuses for its proposed initial public offering.
The company plans to issue 21,739,130 of common shares at a price range of US$21-25 per share….
Global satellite operator Intelsat has announced that it has commenced the distribution of preliminary prospectuses for its proposed initial public offering.
The company plans to issue 21,739,130 of common shares at a price range of US$21-25 per share. Based on the shares pricing at the midpoint of their range (US$23), Intelsat would raise just under US$500m from the share offering.
At the same time, it will sell 3,000,000 Series A mandatory convertible junior non-voting preferred shares at a maximum US$50 per share to raise up to US$150m.
Intelsat has also granted the underwriters a 30-day over-allotment option to purchase up to an additional 3,260,869 common shares and 450,000 Series A preferred shares.
If the greenshoe is fully exercised on both the common and preferred share offerings then Intelsat will receive net proceeds of US$710.1m, after deducting underwriting discounts, commissions and expenses.
The company said that the majority of this will be used to repurchase a potion of its total debt, which was approximately US$15.9bn as of 31 December 2012. In addition, US$39.1m will be paid to the company’s private equity owners BC Partners (71.9%) and Silver Lake (15.87%) as a fee in connection with the termination of the ‘monitoring fee agreement.’
Indeed, Intelsat stated that it does not intend to pay dividends on the common shares for the foreseeable future as it seeks to reduce its leverage. However, the company noted that the convertible preferred shares would offer potential investors a dividend payable on a cumulative basis or quarterly between 2013 and 2016. The shares will automatically convert in 2016.
In addition, as long as the preferred shares are outstanding, no dividend will be paid on the common shares unless all preferred dividend payments have been paid.
The offering of the convertible preferred shares is believed to be in order to attract fixed income investors. While the shares lack the voting rights of common shares, they generally pay a guaranteed quarterly dividend. An Intelsat spokesperson said that the company was issuing the financial instrument in order to attract the broadest range of investors possible. It would also hope to benefit from cross-marketing opportunities with its bond-holders.
Prior to the offering, Intelsat’s issued and outstanding share capital consists of 83,189,261 meaning that the offered shares will represent 20.7% (or 23.1% if the over-allotment is taken up) of the enlarged share capital.
Including the over-allotment and assuming the shares price at their mid-point, Intelsat’s market capitalisation post-transaction would be approximately US$2.653bn.
Pricing of the shares is expected to take place sometime in the middle of April with trading the next day. Intelsat Global Holdings will then be renamed Intelsat S.A. and will trade on the New York Stock Exchange under the symbol ‘I’. The Series A preferred shares will trade under the symbol ‘I PR A’.
Goldman Sachs, JP Morgan, Morgan Stanley and BofA Merrill Lynch are acting as joint book-running managers and underwriters, with Barclays Capital, Credit Suisse, Deutsche Bank, Nomura and UBS book-runners. Evercore Group, HSBC, RBC Capital Markets, LionTree Advisors and Raymond James are acting as co-managers for the proposed offerings.
Paul, Weiss, Rifkind, Wharton & Garrison is legal counsel to Intelsat on the transaction with Latham & Watkins adviser to the underwriters.
