Intelsat Gains Ground In Buying Loral Assets
Intelsat appears to have fended off EchoStar Communications [Nasdaq: DISH] by winning approval from the U.S. Bankruptcy Court for the Southern District of New York to buy the North American satellite assets of Loral Space & Communications [OTCBB: LRLSQ] and certain affiliates for $1.1 billion. EchoStar withdrew its rival $1.029 billion bid for the same assets.
Any appeals have to be filed within 10 calendar days of the Oct. 24 court order. In addition, the purchase still requires approval from the Federal Communications Commission. Both EchoStar and SES Americom have asked the agency to either withhold approval or restrict how Intelsat could use the satellites to provide services to the U.S. government. Intelsat expects the transaction to close early next year.
In anticipation of legal and regulatory clearance, Intelsat last week announced plans to sell $900 million in senior notes to finance the company’s purchase of the Loral assets. Net proceeds from the sale of the notes may also be used for Intelsat’s general corporate purposes.
The North American satellites and orbital slots of Loral will help Intelsat fill a void in its global satellite coverage. As an intergovernmental satellite organization (until its July 2001 privatization), Intelsat was not allowed by the U.S. government to provide satellite services directly to the U.S. market.
The five new satellites – the in-orbit Telstar 5, 6, 7 and 13, and the Telstar 8, set for launch in mid-2004 — and orbital locations will complement Intelsat’s existing global network of 23 satellites, as well as leased capacity on two additional satellites, five commercial teleports, strategic points of presence and fiber connections. The agreement also includes rights to the 77 degrees West longitude orbital slot, formerly occupied by Telstar 4.
Intelsat said it wanted to acquire North American satellites to increase its customer base in the cable television and broadcasting markets. As part of the agreement, Intelsat will acquire contracts of Loral customers in the cable television, broadcasting and private data networking segments.
The decision by the bankruptcy court is a “tremendous step forward” in Loral’s strategy to emerge from bankruptcy as a viable and profitable player in the satellite industry, said Bernard L. Schwartz, chairman and CEO of Loral.
“The sale to Intelsat allows Loral to eliminate its nearly $1 billion in secured debt and provides the framework for a plan of reorganization that recognizes the growth potential of the remaining FSS [fixed satellite services] and manufacturing businesses,” Schwartz said.
Loral intends to reorganize around its remaining satellite services business, comprised of a fleet of five international satellites, and Space Systems/Loral (SS/L), its satellite manufacturing business. SS/L recently received orders for the construction of four satellites – one each for Intelsat and PanAmSat [Nasdaq: SPOT] and two for DirecTV.
(Susan Gordon, Intelsat, 202/944-6890; Jeannette Clonan, Loral, 212/338-5658)