Intelsat deal presages new financing

Intelsat private equity owners are cashing out of most of their investment after London-based private equity firm BC Partners won the bidding to buy a 76% stake in the company for €12.1bn, including the assumption of €8.4bn of debt.

The current shareholders of Intelsat – including Apax Partners, Apollo Management, Madison Dearborn Partners, Permira and management – are expected to receive roughly US$4.6bn in cash after paying US$3bn three years ago, and will continue to hold approximately 24% of the primary ownership of Intelsat Holdings.

Following the sale Intelsat will once again hit the leveraged finance markets.

According to management, US$5.11bn of new debt, largely in leveraged loans, will be issued to finance the deal, via Credit Suisse, Banc of America and Morgan Stanley.

A portion of the new money will be used to retire US$400m of Intelsat’s 5.25% notes due 2008 and US$860m of existing debt at Intelsat Bermuda, resulting in US$3.85bn of incremental debt after the close of the deal, which is anticipated in six to nine months.

The new debt is expected to be layered in a new holding company that will be junior to Intelsat Bermuda and senior to Intelsat; some of it could be in the form of toggle notes.

Another US$1.1bn will come in the form of a cash equity contribution.

The present owners paid US$3bn and assumed US$2bn of debt in August 2004 to acquire the company. Shortly after its sale, they financed a special dividend of US$350m through debt.