Investors are weighing two satellite deals, contrasting the conservative financing being pitched to back The Blackstone Group's $956 million acquisition of New Skies Satellites to PanAmSat Corp.'s more risky credit profile. Last week, PanAmSat issued $250 million of senior discount notes to pay a dividend, decreasing the amount of equity in the company and raising lender concerns.
An investor group led Kohlberg Kravis Roberts & Co. that includesThe Carlyle Group and Providence Equity Partners purchased the satellite company only a short time ago--the acquisition closed Aug. 20. "They took $250 million out of the company before the ink was dry," a buysider commented. One source familiar with the PanAmSat transaction countered, the investor group put in $550 million of equity for the business. After a satellite failed The DIRECTVGroup lowered the purchase price for PanAmSat by $200 million but the equity consortium did not reduce its equity contribution, he added. The B loan was decreased from $1.86 billion to $1.66 billion (LMW, 8/16).
The New Skies deal is going to be more conservatively capitalized than PanAmSat, investors noted. There is $956 million of junior capital. "It looks like its going to have a fairly healthy equity component," a loan investor noted. "It doesn't look like its going to be capitalized as aggressively as PanAmSat was."
Another buysider noted that the equity needs to be larger because New Skies is not as broad in scope as PanAmSat. "Its more of a developmental stage business--it's not as big as PanAmSat and serving more sort of developing markets but with fairly new satellites, which is good news as well," a loan investor noted.
The New Skies bank meeting was scheduled for this afternoon, but was postponed until Oct. 12 due to a delay in regulatory approvals. The credit is made up of a $75 million revolver and $450 million "B" loan. The revolver is going out at LIBOR plus 2 3/4% while the "B" loan is being offered at LIBOR plus 3 1/2%. Deutsche Bank and ABN AMRO are leading the credit. Spokesmen from Blackstone, Deutsche Bank and ABN AMRO did not return calls. Michael Ingelese, cfo of PanAmSat, also did not return calls. A KKR spokesman declined to comment.