S&P rates PanAmSat notes B+

Standard & Poor's said it assigned its B+ rating to the proposed $250 million gross proceeds senior discount notes due 2014 of PanAmSat Holding Corp., a newly formed holding company that will own 100% of fixed satellite services operator PanAmSat Corp. Proceeds will be used to fund a dividend to shareholders.

S&P said all existing ratings on PanAmSat Corp., including the BB corporate credit rating, were affirmed. The outlook is stable.

S&P said the ratings on PanAmSat reflect financial risk from acquisition-related debt; a likelihood of potential acquisitions, which could limit near-term financial profile improvement; and an aggressive financial policy. Business risk concerns include mature industry growth prospects, excess satellite capacity over less-developed regions, competition from terrestrial networks for point-to-point traffic, and potential risk of satellite failure.

Mitigating factors include above-average business risk characteristics due to stable, predictable cash flow from long-term contracts; limited competition because of high barriers to entry and orbital slot scarcity over key geographic areas; the essential nature of the satellite services to key customers, particularly in the video distribution segment; strong EBITDA margins because of low variable costs; customer diversity; a relatively young satellite fleet requiring moderate replacement capital spending; and good asset values.

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