Following the closing of Telesat’s US$2.55bn refinancing, Loral Space & Communications has declared a special dividend of US$13.60 per share, representing an aggregate dividend of up to US$420m. The dividend, which is payable on 20 April 2012, was…
Following the closing of Telesat’s US$2.55bn refinancing, Loral Space & Communications has declared a special dividend of US$13.60 per share, representing an aggregate dividend of up to US$420m.
The dividend, which is payable on 20 April 2012, was announced after Telesat paid the first tranche of its C$705m dividend to its two shareholders, Loral and the Canadian pension fund Public Sector Pension Investment Board (PSP). The satellite operator distributed C$586m of the C$705m with the remainder expected to be paid in Q3 2012.
Commenting on the transaction, Loral CEO Michael Targoff said: “Our investment in Telesat has provided Loral with handsome book returns and growth since our acquisition. Receipt of this significant dividend from Telesat is a partial realization of this investment, and we are pleased to be able to share that with Loral’s shareholders.”
Telesat’s US$2.55bn refinancing comprises a 7-year dual-denominated senior term loan B, split between US$1.725bn and C$175m; a C$500m 5-year senior term loan A and a C$/US$140m revolving credit facility.
While terms have yet to be disclosed, Michael Targoff, Loral’s CEO, said that the average annual interest rate of the financing was 4.4%. The financing is rated Ba3 by Moody’s and BB- by Standard & Poor’s
JP Morgan, Credit Suisse, Morgan Stanley and UBS are joint lead arrangers and joint bookrunners, while CIBC, ING and Scotiabank are as co-managers on the term loan B.
CIBC and JP Morgan are JLAs and joint bookrunners, with Credit Suisse, ING, Morgan Stanley, Scotiabank and UBS as co-managers on both the term loan A and the revolver.
Approximately US$2bn of the proceeds will be used to replace the US$1.8bn term loan and US$150m term loan II facility that mature in October 2014. This leaves Telesat with around US$550m in incremental debt that along with cash-on-hand of C$278m is being used to fund the special dividend.
In addition, Telesat Holdings has completed the redemption of its outstanding senior preferred shares, which are currently held by an affiliate of PSP, in exchange for a note of the same amount issued by Telesat. The note is worth approximately C$146m, pay an interest of 9.75% for the first two years, when at least 50% of it would need to be repaid, and then at least 11% until it matures 31 March, 2016.
Following a spike in its leverage level after its acquisition by Loral and PSP at the beginning of 2007, Telesat has sought to reduce its debt through increasing revenues and earnings and lowering costs. According to Northern Sky Research, Telesat’s net debt to adjusted EBITDA ratio fell from a high of 7.68 times in 2008 to 4.10 times at the end of 2011.
The consultancy added that post-financing Telesat’s leverage would likely remain under 5 times, supporting its management contention that the added debt burden taken on to pay out the special dividend is manageable.
Indeed, NSR concluded, “as the Nimiq-6 and Anik-G1 satellites enter operation in the coming years, the roller coaster ride of Telesat’s debt will take a turn for the better as the company again starts to pay down its debt and send its net debt to Adjusted EBITDA ratio once more on a downward track.”