Satellite operator Intelsat has priced a US$640m senior bond due 2022 at par to refinance notes that mature in 2016.
The notes carry a 6.625% coupon and the company expects to close the transaction on 3 October. Its proceeds will be used to repurchase…
Satellite operator Intelsat has priced a US$640m senior bond due 2022 at par to refinance notes that mature in 2016.
The notes carry a 6.625% coupon and the company expects to close the transaction on 3 October. Its proceeds will be used to repurchase US$603.22m of outstanding 11.25% senior notes due 2016.
The 2022 notes will be issued from the operator’s Intelsat Jackson Holdings unit.
Morgan Stanley is understood to have led the deal, which represents Intelsat’s first non-guaranteed debt since its 2008 acquisition by BC Partners.
Recent policy announcements by central banks have bolstered investor confidence in US bonds, and a surge of companies have been tapping the market this week while bank lending remains low. The week saw UK-based mobile giant Vodafone price US$2bn worth of notes in its biggest US debt deal for years.
For Intelsat, tapping the high yield bond markets is a core part of its sizeable refinancing strategy. The operator has so far refinanced approximately US$8.5bn of debt over the past 12 months with notes.
Speaking to delegates at the World Satellite Business conference in Paris last week, Morgan Stanley managing director Fred Turpin argued that “there has probably never been a better time to raise high yield”.
He pointed to rates on high yield issuances being close to an all-time low, and how investors see the FSS sector as particularly attractive.
Both Intelsat and its Canadian peer Telesat have sought to lock in this demand over the past year, and their bonds continue to trade very well. They are expected to be joined by Luxembourg-headquartered SES, which is targeting a dollar denominated corporate bond offering by the end of the year.
The notes were rated Caa2 with a stable outlook by Moody’s, which said that as of 30 June long term debt to EBITDA, incorporating the agency’s standard adjustments, was 8.4x.
Moody’s stated: “Financial leverage is elevated as a consequence of debt-financed ownership changes and significant capital expenditures, and it is not clear that the EBITDA stream is large enough – or can grow sufficiently in a reasonable time frame – to fund all of operating costs, interest expense, cash taxes, and capital expenditures.”
In addition, Intelsat Jackson Holdings has announced plans to amend US$3.7bn of senior secured credit facilities, made up of a US$3.2bn Term Loan B and a US$500m revolver. Early price talk is in the range of +325-350bp for both, and the group is targeting a 1% LIBOR floor. Today this stands at 375bp with a 1.5% floor.
BofA Merrill Lynch is the lead bank on this amended facility, with Credit Suisse and JP Morgan.
