Intelsat has priced $1.25 billion in senior notes due 2024 at par for purposes that could include capex, working capital, and repaying debt. Goldman Sachs is understood to be a lead bank on the deal along with Guggenheim, and JP Morgan is thought to be co-manager on the offering.
Intelsat (NYSE:I) has priced $1.25 billion worth of senior notes due 2024 at par for purposes that could include capex, working capital, and repaying debt.
The bond, upsized from US$1bn, carries an 8% coupon and is set to close on 29 March.
Goldman Sachs is understood to be a lead bank on the deal along with Guggenheim, which was hired last month to assess financing options for the fleet operator’s debt mountain. JP Morgan is thought to be co-manager on the offering.
The notes are being issued through the company’s Intelsat Jackson Holdings subsidiary, which had about US$12.6bn in loans and bonds at the end of 2015. This unit’s direct 100% owner Intelsat Luxembourg held approximately US$3.5bn in notes.
Shares in their ultimate parent group Intelsat, which have been steadily declining since their US$18 IPO price in April 2013, closed up 8.08% to US$2.81 today.
The group’s debt level has weighed on its shares as fixed satellite operators face capacity pricing concerns amid a flood of high throughput services coming onto the market.
Intelsat believes satellite launches this year for its next-generation HTS EpicNG constellation will return the group to growth. CEO Steve Spengler has said growth opportunities it has identified “should eclipse the challenging environment”.
SatelliteFinance understands that Goldman Sachs has also been testing market appetite for some of its assets, although the group is thought unwilling to compromise its status as a top four operator. Intelsat has declined to comment on any asset sale activities.
The operator revealed Guggenheim’s mandate towards the end of February as it said preliminary 2015 revenue fell to US$2.35bn, 4.9% down on 2014. It posted adjusted 2015 EBITDA at US$1.85bn, compared with US$1.96bn for the previous year. It also expects “a substantial reduction” of its US$6.8bn goodwill and other intangible assets.
A few days later, Moody’s downgraded Intelsat’s corporate family and probability of default ratings from B3 to Caa2 and B3-PD to Caa2-PD, respectively, while changing its outlook from stable to negative.
“The actions were prompted by a combination of business fundamentals and capital structure considerations that, from Moody’s perspective, signal the company’s debt structure has become unsustainable,” the agency said.
“In particular, while Intelsat’s major fixed satellite services peer companies report challenging conditions in the network services sector, a segment that Moody’s views as being highly commoditized, with Intelsat’s revenue mix disproportionately exposed to that sector, future growth prospects are uncertain. Additionally, while management views its new high throughput satellites as addressing commoditization, Moody’s wonders whether they add capacity to an already over-supplied market, and it is unclear to Moody’s whether ongoing negative re-pricing momentum can be curtailed.”
It added that the group could be upgraded if it demonstrated cash flow self-sustainability over the life cycle of its satellite fleet, together with positive industry fundamentals, maintenance of solid liquidity, and clarity on capital structure planning.
Following news of its latest bond, Moody’s downgraded Intelsat’s probability of default rating further from Caa2-PD to Caa3-PD, adding that the agency interprets the use of proceeds to be a step towards a more comprehensive debt restructuring, which it “presumes will include interim steps in which outstanding debts are refinanced at less than par, and which it will likely interpret as comprising limited defaults”. It gave the new notes a B1 rating.
The debt offering will be the first under Intelsat’s new CFO Jacques Kerrest, who joined on 29 January from DPC Data, a US municipal bond disclosure data and solutions provider.
Last week, the operator announced it had promoted Skot Butler, its VP of satellite networks and space services, to president of Intelsat General Corporation, a wholly owned unit focused on providing satcoms to military, commercial and government customers.
Butler will begin his new role on 4 April when he takes over from Kay Sears, who is leaving Intelsat General after 10 years to lead business development at Lockheed Martin Space Systems.
