The $650 million of bank debt backing the acquisition of Intelsat by Zeus Holdings is unlikely to change, even if the purchase price of the company is lowered. On Jan. 14 the company lost service of its IS-804 satellite. In a conference call held last week, it was noted that if the purchase price does get reduced the $2.55 billion bond package will be downsized, a buysider said.
This is the second satellite failure the company has had recently, prompting Moody's Investors Service to change its rating outlook to negative from stable. Moody's believes the company may encounter additional capital expenditures and operating expenses as a result of the glitch. Moody's is also concerned that customers may lose confidence in Intelsat with the two failures happening in such a short period of time. The rating could be lowered if Zeus decreases the amount of equity relative to debt used to fund the buyout instead of reducing the notes, Moody's notes.
The bank deal comprises a $300 million revolver and $350 million "B" loan (LMW, 1/10). Price talk is LIBOR plus 2% on the revolver and LIBOR plus 2 1/4% on the term loan. The credit is led by Deutsche Bank, Credit Suisse First Boston, and Lehman Brothers. During the syndication of PanAmSat's credit, one of its satellites failed, causing the purchase price of the company to be reduced by $200 million and the "B" loan to be lowered by the same amount (8/16). Zeus is an entity formed by Apax Partners, Apollo Management, Madison Dearborn Partners and Permira. An Intelsat spokeswoman and officials from the lead banks did not return calls.