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Intelsat rolls $5.04B bridge commitment into bonds; terms

New York, June 25 (LCD) – The Intelsat LBO bridge loans late yesterday were converted into permanent securities under Rule 144A via joint bookrunners Credit Suisse, Bank of America and Morgan Stanley. The interest rates initially are locked at yesterday’s floating-rate level, but step up to 11.25% and 11.5% for the respective cash-pay and PIK-toggle tranches on Aug. 4. The latter will pay an extra 100 bps, or 12.5%, when the issuer elects to pay in kind – an option available for the first five years only – and the increase in size represents marginal PIK accrual since the $2.155 billion facility funded earlier this year. Word on the Street is that Credit Suisse earlier this year successfully off-loaded its senior cash-pay commitment to a mix of standard high-yield investors and non-traditional accounts, including one of the buyout sponsors, Apollo Management. Thus, just two thirds of that tranche is available to new-money investors via the other two bookrunners. However, all three underwriters held their entire original position of the PIK-toggle tranche, sources said. Underwriters haven’t immediately stepped forward with an offering of the senior cash-pay and PIK-toggle notes. The expectation is for privately negotiated block sales at deep discounts akin to the Harrah’s and Biomet LBO debt, among others.

Prospects for the debt sale have improved in recent months on account of generally better market conditions – not including this week or last, of course – as well as a favorable view of the company. Investors have hailed the strong growth trends in the industry and, more specifically, the company’s better-than-average revenue stability due to a contracted backlog, a matter of particular importance amid the uncertain economic environment, sources say.

Additionally, there’s a technical underpinning for the various new Intelsat bond issues on account of their prominent standing in indexes, according to investors.

A group led by BC Partners in February acquired Intelsat from a consortium comprising Apax Partners, Apollo Management, Madison Dearborn Partners and Permira Advisers. Interestingly enough, Apollo was named as one of the non-traditional investors in the cash-pay bridge facility, according to sources.

Intelsat assumed an additional $4.96 billion in debt to back the buyout, split between the aforementioned cash-pay senior unsecured bridge loan and PIK-toggle bridge loan. Both facilities funded in February when the LBO closed, and both have a Feb. 4, 2017 maturity date. Terms:

Issuer: Intelsat Bermuda
Ratings: CCC+/Caa2
Size: $2.805 billion
Issue: senior notes (144A)
Coupon: 7.2844% (steps to 11.25% in August)
Price: 100.00
Yield: n/a
Spread: n/a
LIBOR Eq: n/a
Maturity: Feb. 4, 2017
Call: nc5
Trade: June 24, 2008
Settle: June 27, 2008 (t+3)
Books: CS/BAS/MS
Co’s:
Px Talk: n/a
Notes: w/ change of control put @101;
Issuer: Intelsat Bermuda
Ratings: CCC+/Caa2
Size: $2.231 billion
Issue: senior PIK toggle notes (144A)
Coupon: 7.5344% (steps to 11.5% in August and 12.5% when in kind)
Price: 100.00
Yield: n/a
Spread: n/a
LIBOR Eq: n/a
Maturity: Feb. 4, 2017
Call: nc5
Trade: June 24, 2008
Settle: June 27, 2008 (t+3)
Books: CS/BAS/MS
Co’s:
Px Talk: n/a
Notes: PIK election for first five years only, pays 12.5%