Canadian satellite operator Telesat has revealed that it is planning to undertake a refinancing of its senior secured credit facilities that would see it incur incremental senior debt of up to C$530m. The incremental financing along with cash on hand,…
Canadian satellite operator Telesat has revealed that it is planning to undertake a refinancing of its senior secured credit facilities that would see it incur incremental senior debt of up to C$530m. The incremental financing along with cash on hand, which amounted to C$278m at year-end 2012, would pave the way for a special dividend payment of up to C$705m.
The announcement is interesting given that in its third quarter results in November 2011, Telesat stated that it had called off the recapitalisation plan, due principally to certain tax and corporate structuring considerations as well as deteriorating market conditions. To that end, CEO Dan Goldberg stated that as the new recap plan is smaller than the original, these same problems would not occur.
Speaking on Telesat’s full year 2011 results conference call, Goldberg said: “The smaller refinancing and distribution we are now considering doesn’t give rise to the tax and structuring issues that dissuaded us from going forward earlier. Given the fact that we have nearly doubled our EBITDA since the time we put our existing capital structure in place and given the substantial contract growth we have, we believe that we can take on these additional borrowings without prejudicing our ability to fund future growth initiatives or otherwise meet our obligations. Obviously our ability to complete any refinancing transaction is subject to market conditions.”
As to the timeframe for the process, Goldberg added: “This is something that we’d like to get done over the next couple of months.”
Telesat currently approximately US$2.957bn of total debt, comprising a US$1.8bn term loan and US$150m term loan II facility that mature in October 2014. According to ratings agency Standard & Poor’s, the recapitalisation would increase the company’s adjusted debt to EBITDA ratio from the current low-5x area to about 6x.
While Telesat reported a 2% decrease in annual consolidated revenue to C$808m, when adjusted for foreign exchange rate changes, revenue actually increased by 1%. EBITDA was also up 1% for the year to C$623m meaning the company’s EBITDA margin was 77% compared to 75% for 2010. Net income, though, fell by C$49m year-on-year to C$237m, predominantly due to a net decrease in non-cash items such as gains and losses on foreign exchange trades.
