Lehman Brothers and Morgan Stanley are in the market with a $235 million senior secured credit facility for Iridium Satellite. The deal consists of a $10 million revolver, a $175 million first lien and a $50 million second lien. The first lien is priced at LIBOR plus 3 1/4% and the second lien is priced at LIBOR plus 6 1/2%. Funds will be used to pay a $123 million dividend, repay $78.1 million in bank debt and collateralize a $15.4 million letter of credit.
The company was formed in December 2000 following the acquisition of the operating assets of the bankrupt Iridium LLC. Bethesda, Md.-based Iridium provides mobile satellite services to 127,000 commercial customers and 27,500 Department of Defense users as of May 2006. Before bankruptcy the company was set up as a consumer-based business model, but when it emerged it had a small business base that was predominately government-related. Since emergence it has cultivated those government relationships and also started appealing to individuals that work in the maritime sector, another banker explained. While some investors were worried about the name of the company and had flashbacks to the collapse of Iridium LLC, the banker stressed that the pre and post bankruptcy Iridiums have very different business models.
One investor speculated the financing could do well because of its government contracts. "Let's just see how it goes," he said. "On the one hand, this could do well because they have [government] contracts, but if they don't catch on..."
Standard & Poor's assigned a B- rating with a negative outlook.