Intelsat has priced US$3.5bn in senior notes after reducing its proposed IPO following a higher cash balance and attractive bond rates.
The pricing came a day after the global satellite operator announced plans to offer a US$1.5bn bond due 2021, which…
Intelsat has priced US$3.5bn in senior notes after reducing its proposed IPO following a higher cash balance and attractive bond rates.
The pricing came a day after the global satellite operator announced plans to offer a US$1.5bn bond due 2021, which eventually came to the market for a total US$2bn and a 7.75% coupon.
In addition, Intelsat issued US$500m of 6.75% senior notes due 2018, and US$1bn of 8.125% senior notes due 2023.
All bonds were priced at par and will go towards refinancing the company’s substantial debt pile.
Sources close to the issue noted a frenzy of activity for what will be one of the largest high yield refinancing deals this year, with an order book that reached around US$9bn.
SatelliteFinance understands Goldman Sachs is the lead-left bookrunner, while Morgan Stanley and JP Morgan also arranged the notes.
The issue comes a week after the group cut the size of its planned IPO by US$1bn to US$750m, as it said the favourable interest rate environment for bonds provided a significant opportunity to lower interest costs through refinancing.
Incoming cash proceeds from Sea Launch’s failure to place the Intelsat-27 satellite last month also led to the operator’s decision to lower the equity offering.
Intelsat expects to use proceeds from the new bonds to redeem the approximately US$2.503bn of outstanding 11.5%/12.5% senior PIK notes due 2017 – nearly US$1.6bn more than previously planned as a result of the upsizing.
The operator had issued a call notice on the PIK notes earlier this month, with the intention of redeeming US$915m worth at 105.75% of the principal amount on 5 April.
New bond proceeds will also be used to redeem around US$754.8m worth of 11.25% senior notes due 2017.
Intelsat kept the door open for further debt refinancing with the remainder of its proceeds, saying it will be used for general corporate purposes, which “may include the repayment, redemption, retirement or repurchase of additional 2017 senior notes or other outstanding indebtedness of Intelsat Luxembourg and its subsidiaries”.
In total it has around US$5bn in callable debt at the Intelsat Luxembourg level, paying coupons in excess of 11%, all of which is widely considered to be a focus of refinancing opportunities.
Moody’s said Intelsat’s Caa1 rating and positive outlook remain unchanged after the upsized bond offering.
Meanwhile, Goldman Sachs, JP Morgan and Morgan Stanley are arranging and serving as underwriters for the flotation, while private equity firm BC Partners, the company’s majority 71.9% shareholder, has engaged Evercore for financial advice.
Adds convertible preferred share offering to IPO prospectus
Intelsat has again amended its planned initial public offering. Having recently cut the size of its offering by US$1bn to US$750m, the satellite operator is now proposing to sell series A mandatory convertible junior non-voting preferred shares concurrent to the issuance.
The size of the convertible preferred share offering has not been specified although the IPO underwriters, Goldman Sachs, JP Morgan and Morgan Stanley, will have a 30-day over allotment option. The shares will automatically convert in 2016.
One banker told SatelliteFinance the use of this type of financial instrument is usually in order to attract fixed income investors. While the shares lack the voting rights of common shares, they generally pay a guaranteed quarterly dividend.
With Intelsat highly leveraged and looking to use the proceeds of the offering to pay down debt, dividend payments for the newly issued common shares are unlikely for the near term. However, Intelsat stated that the convertible preferred shares would offer potential investors a dividend payable on a cumulative basis or quarterly between 2013 and 2016.
