Iridium has amended its US$1.8bn Coface credit facility to allow the MSS operator to raise capital if it fails to net US$100m from the conversion of its outstanding US$7 per share warrants by their February 2013 deadline.
With Iridium’s stock…
Iridium has amended its US$1.8bn Coface credit facility to allow the MSS operator to raise capital if it fails to net US$100m from the conversion of its outstanding US$7 per share warrants by their February 2013 deadline.
With Iridium’s stock historically fluctuating below the exercise price, the company’s contingency plan will see it make up any shortfall for its US$100m target through issuing convertible preferred or common equity. If required, Iridium must issue this equity by 30 April 2013 to make up any difference.
As of 30 June 2012, there were approximately 13.7 million unexercised US$7 per share warrants outstanding. Separately, the company also had approximately 277,000 of US$11.50 warrants outstanding at this date.
According to Iridium, the decision to amend the Coface agreement was primarily made to allow the group to fund and operate its recently announced Aireon subsidiary. This new unit, a joint venture shared with Canada’s civil air navigation service, aims to improve air traffic management through satellite technology.
The Coface agreement was originally secured back in October 2010, with Societe Generale as agent, to support the US$3bn cost of the company’s next generation constellation, Iridium NEXT. Aireon will be operating from Iridium NEXT satellites as a hosted payload.
In an SEC filing, Iridium added: “The amended credit facility allows us to make our planned US$12.5m investment in Aireon, the equity injection of up to US$10m worth of airtime credits permitted by Aireon’s previously disclosed products and services agreement with Harris Corporation on 19 June 2012, if needed, and an additional investment of up to US$15m raised from an issuance of our common equity, though we have no plans to make such additional investment at this time.
“The amended credit facility requires us to use any net distributions from Aireon to repay the debt under the credit facility and to give the lenders a security interest in our ownership interest in Aireon.”
In addition, the amended facility paved the way for Iridium to revise a March 2010 launch services agreement with SpaceX for the upcoming Iridium NEXT spacecraft.
The adjusted launch deal sees Iridium reduce the number of launches it will purchase from SpaceX from eight to seven, and increases the number of satellites per launch from nine to ten, generating a saving of around US$39m.
“This is all thanks to the greater lift capability being demonstrated by the Falcon 9 system,” Iridium CEO Matt Desch told investors during the company’s Q2 2012 results call.
“Perhaps most importantly, it fits nice with our plan now to exercise our option for our first launch with our supplemental launch services provider, ISC Kosmotras, on their proven Dnepr rocket. This flexibility allows us to send up just two satellites in our first launch, which gives us the ability to thoroughly test the operation of our Iridium NEXT system before raising the bulk of the constellation with SpaceX and subsequent launches”
Desch said the new launch strategy for Iridium NEXT still caters for the 72 birds that it has planned for, with the first two earmarked for a Dnepr rocket in early 2015, and the remaining on SpaceX’s Falcon 9 from mid-2015.
“It’s a smarter strategy for in-orbit testing and provides us some additional cost savings,” he explained.
“It also gives SpaceX a little more time to get through the two dozen or so launches that are on their manifest before Iridium NEXT.
Iridium posted Q2 2012 revenue up 1% to US$97.3m, compared with the corresponding period in 2011. Q2 2012 operational EBITDA grew 7% on the year to US$52m.
