The $350 million "B" loan for Intelsat filled up prior to a bank meeting last week, despite some buyside concern that too much satellite paper is circling the market. "People can only buy so much satellite paper before you start getting chunky," one loan investor noted.
The Intelsat facility is a part of the financing backing the acquisition of the company by Zeus Holdings, an entity formed by Apax Partners, Apollo Management, Madison Dearborn Partners and Permira. The Intelsat bank deal is small, which led several investors to speculate it would not have a hard time in the market. "It's extremely low leveraged through the banks," a buysider noted. The credit comprises a $350 million "B" loan and $300 million revolver. There is approximately $2.55 billion of eight-year, high-yield bonds beneath the bank debt. The bank deal is being led byDeutsche Bank, Credit Suisse First Boston and Lehman Brothers.
But the satellite sector can be risky. Intelsat lost control of its Intelsat Americas-7 satellite in November. "You don't want to get overexposed to that sector," a portfolio manager said. "There is one catastrophic risk in that business--a major solar flare can knock out large chunk of satellites in the sky." But another investor said these problems are fixable. "It's scary when one of the things breaks up there," he said. "We've seen it happen before and companies have been able to recover from it." During the syndication of PanAmSat's credit, one of its satellites failed, causing the purchase price of the company to be lowered by $200 million (LMW, 8/16). "People do have concerns about the industry, but I don't think the market is saturated with it yet...People have gotten comfortable with the business model," he argued. Officials at the lead banks either declined comment or did not return calls. An Intelsat spokeswoman did not return calls.
Price talk is LIBOR plus 2% on the revolver and LIBOR plus 2 1/4% on the term loan. PanAmSat is currently trying to take its coupon down to LIBOR plus 2 1/4% from LIBOR plus 2 3/4%. "PanAmSat is clearly the better company. I think PanAmSat is better diversified, has better slots," a portfolio manager said. "If PanAmSat is priced down to 225, it seems to me that Intelsat should probably trade at a higher spread than PanAmSat." He said PanAmSat is trading down a little because of the repricing but would probably be trading north of 101 if that wasn't the case. New Skies Satellites is trading around 101.
PanAmSat's $2.71 billion credit was put in place to back the acquisition of the company by Kohlberg Kravis Roberts & Co., The Carlyle Group and Providence Equity Partners. New Skies' $525 million credit was part of the financing for The Blackstone Group's acquisition of the company (10/4). Apax and Permira acquired UK-based satellite communications company Inmarsat Ventures last year, using $975 million of bank debt (12/7/03).