Loral Space & Communications bank debt ran up from the 85 context to the 95 98 range last week its second big jump in as many months after the company announced that it had filed for bankruptcy to facilitate the sale of six of its North American satellites. The filing will enable Loral to sell the satellites unencumbered, a typical strategy used to essentially sanitize the sale, explained Harvey Miller, a managing director at Greenhill and also a financial advisor to Loral. Market players noted that the paper traded actively. A $10 million piece changed hands in the 93 943/4 context, according to traders.
"The general perception is that [the bank debt] will be taken out at par," said one buysider. Loral has about $959 million of outstanding bank debt and expects the sale of the satellites to Intelsat to bring in roughly $1.1 billion in cash. BNP Paribas and Citigroup are leading a $2.2 billion financing package to back Intelsat's acquisition of these satellites (see story, page 2).
The first of the sharp increases for Loral's bank debt levels came in early June, when following a bank meeting the paper traded up almost 20 points in a single day. The name had been quoted in the low 60s but shot up to the 80-83 range. While the details of the meeting could not be determined, speculation in the public markets included potential asset sales (LMW, 6/15).
Loral's bankruptcy filing was also precipitated by the substantial interest payment that the company had coming due. Miller noted that bonds held by the Loral Orion subsidiary had a $35-36 million payment that was due on July 15. "Loral has been hurt by weakness in demand for telecommunications services, along with softness in its satellite manufacturing business," notes Standard & Poor's. The company had a debt-to-annualized EBITDA of about 35 times, according to S&P.
Bank of America led the two credit facilities held by Loral and its subsidiary Loral Satellite. The net book value of the assets that secured Loral's $555 million credit totaled approximately $642 million, according to the company's 10-Q. Loral Satellite's $437.8 million credit was backed by assets in excess of $500 million, including its Telstar 6 and Telstar 7 satellites. Going forward, the company plans to reorganize around its remaining fleet of five satellites.