The protracted sale of Canadian satellite operator Telesat is again in the balance as the two Canadian pension funds seeking to buy out Loral Space & Communications have baulked at the cost of financing the deal.
According to one SatelliteFinance…
The protracted sale of Canadian satellite operator Telesat is again in the balance as the two Canadian pension funds seeking to buy out Loral Space & Communications have baulked at the cost of financing the deal.
According to one SatelliteFinance source, the Ontario Teachers’ Pension Plan (OTPP) and Public Sector Pension Investment Board (PSP) are struggling to secure the debt funding for the deal at a price that they could justify.
The source argued that the long-mooted transaction will be put on hold until the funds have worked out a financing structure for the deal that works. They added that this will still include a sizeable debt portion but could mean they will target the high yield bond rather than leverage loan market to achieve more attractive rates.
With takeover talks having broken down on numerous occasions over the past year, OTPP and PSP finally agreed a deal in principle to purchase Loral for around US$83-85 per share late last year.
Valuation had been the key stumbling block but the payment split of Space System Loral’s US$100m patent settlement with ViaSat and a issues over a US$300m consent fee between Telesat’s owner’s Loral and PSP had also threatened to scupper the deal.
Loral currently owns a 63% economic interest and 33% voting interest in Telesat with PSP holding the remainder. If the Canadian funds were successful in their pursuit, PSP would increase its economic share to 50% while simultaneously reducing its voting rights to 50%.
Loral also owns 56% of XTAR, a joint venture it shares with Spanish satellite operator Hisdesat that offers X-band services to government customers. It sold its Space Systems Loral satellite manufacturing subsidiary back in 2012 to MacDonald, Dettwiler and Associates for US$875m.
Following reports that the sale had stalled, Loral’s shares fell by more than 5% in pre-market trading on Monday 12 January.
Credit Suisse is advising on the sale of Loral, while Perella Weinberg is reportedly advising the company’s independent board.
