Machine-to-machine satellite operator Orbcomm has completed a US$45m debt financing in the form of a five-year term loan with AIG Asset Management.
Under the terms of the senior secured note agreement, the loan has no required principal amortization and…
Machine-to-machine satellite operator Orbcomm has completed a US$45m debt financing in the form of a five-year term loan with AIG Asset Management.
Under the terms of the senior secured note agreement, the loan has no required principal amortization and a fixed interest rate of 9.5%, payable quarterly. Orbcomm can also prepay the notes at any time prior to maturity.
The company stated that it intends to use proceeds from the AIG financing to facilitate growth opportunities such as new services, product offerings, geographic distribution and potential acquisitions into key vertical markets. The proceeds will also provide a capital expenditure cushion.
Sagent Advisors advised Orbcomm on the financing with Milbank, Tweed, Hadley & McCloy providing legal advice.
Commenting on the transaction, Marc Eisenberg, chief executive officer of Orbcomm, said: “We are pleased to have additional financing available to pursue strategic growth opportunities while at the same time preparing for the launch of our next generation OG2 satellites.
“We plan to use the proceeds of this transaction toward OG2-related growth opportunities, including enhanced products and services. In addition, we will look at further acquisitions within key vertical markets and geographies that will take advantage of the advanced capabilities of our OG2 satellites.”
The first thing Orbcomm plans to do with the money is to repay its existing debt of U$3.5m, which was incurred as part of the US$18.5m acquisition of M2M solutions specialist StarTrak back in May 2011.
At the same time, Orbcomm is to terminate its existing US$20m secured revolving credit facility with satellite manufacturer Sierra Nevada Corporation that was available under the next generation OG2 satellite development program.
That agreement, which was offered as part of the original May 2008 OG2 satellite procurement contract, provided Orbcomm with advances during the period from July 2012 to April 2014. However, no amounts have been drawn under the credit agreement.
Orbcomm also has a separate US$15m revolving working capital facility in the form of inventory and accounts receivable borrowing based loans.
Meanwhile, Orbcomm stated that it anticipates launching the 18 OG2 satellites as the primary mission on two planned SpaceX Falcon 9 launches, the first in mid-2013 and the second in 2014.
Back in October 2012, the company was forced to deorbit its OG2 prototype satellite after it was deployed into a lower orbit as a result of an engine failure to the SpaceX Falcon 9 rocket carrying it.
Despite this, the satellite’s manufacturers Sierra Nevada Corporation and Boeing managed to complete series of system verification and functionality tests on the spacecraft, while Orbcomm stated that if the prototype had been the primary payload it believed it would have reached its desired orbit.
On 7 December 2012, Orbcomm received a US$10m insurance settlement, the full amount recoverable under the insurance policy for the OG-2 prototype satellite.
