Moody's downgrades PanAmSat

Moody's Investors Service said it downgraded PanAmSat Corp.'s debt ratings following the company's decision to issue $250 million of new senior discount notes, with proceeds from the new notes to be used to pay a dividend to the company's shareholders who purchased the company last month via a leveraged buyout.

More specifically, Moody's downgraded PanAmSat's senior implied rating to B1 from Ba3, $2.460 billion senior secured bank debt to B1 from Ba3, $150 million senior secured notes due 2008 to B1 from Ba3, $125 million senior secured notes due 2028 to B1 from Ba3, $1.010 billion senior unsecured notes due 2014 to B2 from B1, and unsecured issuer rating to B2 from B1.

Moody's assigned a Caa1 rating to the new discount notes.

The outlook is stable.

The downgrade reflects Moody's concern with the affect that the new debt issue and dividend will have on the company. The company's already high financial leverage results from the very recent leveraged buyout of PanAmSat by several private equity sponsors in August of this year.

It also reflects Moody's view that the company will have minimal equity capitalization and that this unanticipated move discounts Moody's expectations for credit improvement and maintenance driven largely by the company's recently communicated business plan.

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