New Issue: Intelsat/PanAmSat prices restructured, downsized $2.9 billion mega-deal

By Paul Deckelman

New York, June 19 - The gigantic multi-part bond deal that will help finance the merger of satellite communications operators PanAmSat Holding Corp. and Intelsat Ltd. finally priced on Monday morning, junk market syndicate sources said, after having been restructured, downsized and delayed - and after prospective investors held out for sweetened terms in the form of higher coupon interest.

The companies brought a four-tranche offering totaling $2.915 billion, down from the $3.515 billion originally envisioned, with the $600 million difference taking the form of a 10-year bridge loan.

Original market expectations had been for the deal to price last Thursday, but it was floated off until Friday, as wider price talk on the three fixed-rate tranches emerged. But when Friday rolled around, there still was no pricing, as the companies and the deal's underwriters did some last-minute tinkering, downsizing one component and setting up the bridge loan. They set their sights on an early Monday pricing, which is what ultimately did happen.

PanAmSat Corp., the operating company subsidiary for PanAmSat Holding Corp., priced a $575 million tranche of senior notes maturing June 15, 2016. Those notes, which are non-callable for the first five years after issue, priced at par to yield 9%, right in line with revised pre-deal market price talk envisioning a yield in the 9% area. The notes had previously been talked in a range of 8¾% to 9%.

Also pricing was $750 million of senior notes maturing June 15, 2016 from Intelsat's holding company subsidiary, Intelsat (Bermuda) Ltd., and guaranteed by Intelsat's operating company subsidiary, Intelsat Subsidiary Holding Co. Those notes, which are non-callable for five years, priced at par to yield 9¼%, in line with the revised price talk, although wider than the 8¾% to 9% range at which the notes were originally expected to price.

The biggest portion of the deal - Intelsat (Bermuda)'s fixed- and floating-rate non-guaranteed notes - totaled $1.59 billion, downsized from the originally envisioned $2.19 billion. These consisted of $1.33 billion of fixed-rate senior notes due June 15, 2016 and $260 million of floating-rate seniors due June 15, 2013.

The 10-years priced at par to yield 11¼%, at the wide end of the revised price talk of 11% to 11¼%, which had widened out from the 10¾% to 11% anticipated yield initially talked about. They are non-callable for the first five years after issue.

The seven-year floaters priced at par and will initially pay interest of 600 basis points over the six-month Libor, at the wide end of price talk calling for a yield of between 575 and 600 basis points over Libor. The interest rate will be adjusted semiannually. They are non-callable for the first two years after issue.

Besides the bonds, the $600 million 10-year senior un-guaranteed bridge loan priced to yield 11¼%.

Deutsche Bank Securities, Citigroup, Credit Suisse, Lehman Brothers and Merrill Lynch & Co. served as joint book-running managers on the PanAmSat portion of the blockbuster deal, with Goldman Sachs & Co., Bear Stearns, BNP Paribas, JP Morgan and Royal Bank of Scotland as co-managers. The Intelsat tranches all had the same bookrunners and co-managers, except that Merrill Lynch served as a co-manager for all three, rather than as one of the joint bookrunners.

The deal came to market under Rule 144A and Regulation S. It was marketed to potential investors via a roadshow, which began on June 6 and which ran through Thursday.

The proceeds will be used, along with cash on hand, to fund the acquisition of Wilton, Conn.-based PanAmSat by Intelsat, which is based in Pembroke, Bermuda, and in London.

The two satellite communications companies announced on Aug. 29, 2005 that Intelsat will acquire PanAmSat for $25 per share in cash, or $3.2 billion, with another approximately $3.2 billion in debt of PanAmSat and its subsidiaries to remain outstanding or be refinanced.

On May 26, PanAmSat announced that Justice Department antitrust regulators had given the two companies the green light to proceed with their merger. Closing of the merger transaction is subject, among other things, to the receipt of the needed financing by Intelsat, and to obtaining regulatory approval from the Federal Communications Commission. All other regulatory approvals required prior to closing have been obtained, PanAmSat said.

Tranche 1

Issuer:	PanAmSat Corp.
Amount:	$575 million
Security description:	Senior notes
Maturity:	June 15, 2016
Bookrunners:	Deutsche Banc Securities, Lehman Brothers, Citigroup, Credit Suisse, Merrill Lynch (joint)
Co-managers:	Bear Stearns, Goldman Sachs, BNP Paribas, JP Morgan, Royal Bank of Scotland
Coupon:	9%
Price:	Par
Yield:	9%
Price talk:	9%, revised from original 8¾% to 9%
Spread:	387 basis points over Treasuries
Call schedule:	Non-callable for first five years after issue, then at 104.50, 103, 101.5, finally at par.
Equity clawback:	For first three years for 35% of issue at 109
Pricing date:	June 19
Settlement date:	July 3
Ratings:	Moody's: B2
	Standard & Poor's: B
Distribution:	Rule 144A and Regulation S
Tranche 2
Issuer:	Intelsat (Bermuda) Ltd.
Amount:	$750 million
Security description:	Senior notes, guaranteed by operating company
Maturity:	June 15, 2016
Bookrunners:	Deutsche Banc Securities, Lehman Brothers, Citigroup, Credit Suisse (joint)
Co-managers:	Merrill Lynch, Bear Stearns, Goldman Sachs, BNP Paribas, JP Morgan, Royal Bank of Scotland
Coupon:	9¼%
Price:	Par
Yield:	9¼%
Price talk:	9¼%, revised from original 8¾% to 9%
Spread:	412 basis points over Treasuries
Call schedule:	Non-callable for first five years after issue, then at 104.625, 103.083, 101.542, finally at par
Equity clawback:	For first three years for 35% of issue at 109.25
Pricing date:	June 19
Settlement date:	July 3
Ratings:	Moody's: B2
	Standard & Poor's: B+
Distribution:	Rule 144A and Regulation S
Tranche 3
Issuer:	Intelsat (Bermuda) Ltd.
Amount:	$1.33 billion
Security description:	Non-guaranteed senior notes
Maturity:	June 15, 2016
Bookrunners:	Deutsche Banc Securities, Lehman Brothers, Citigroup, Credit Suisse (joint)
Co-managers:	Merrill Lynch, Bear Stearns, Goldman Sachs, BNP Paribas, JP Morgan, Royal Bank of Scotland
Coupon:	11¼%
Price:	Par
Yield:	11¼
Price talk:	11% to 11¼% revised from original 10½% to 11%
Spread:	612 basis points over Treasuries
Call schedule:	Non-callable for first five years after issue, then at 105.625, 103.75, 101.875, finally at par
Equity clawback:	For first three years for 35% of issue at 111.25
Pricing date:	June 19
Settlement date:	July 3
Ratings:	Moody's: Caa1
	Standard & Poor's: B
Distribution:	Rule 144A and Regulation S
Tranche 4
Issuer:	Intelsat (Bermuda) Ltd.
Amount:	$260 million
Security description:	Non-guaranteed senior floating-rate notes
Maturity:	June 15, 2013
Bookrunners:	Deutsche Banc Securities, Lehman Brothers, Citigroup, Credit Suisse (joint)
Co-managers:	Merrill Lynch, Bear Stearns, Goldman Sachs, BNP Paribas, JP Morgan, Royal Bank of Scotland
Initial Coupon:	600 basis points over six-month Libor
Price:	Par
Yield:	600 basis points over six-month Libor; rate floats semiannually
Price talk:	575 to 600 basis points over Libor
Call schedule:	Non-callable for first two years after issue, then at 103, 102, 101, finally at par
Equity clawback:	For first two years for 100% of issue at par plus then-applicable coupon
Pricing date:	June 19
Settlement date:	July 3
Ratings:	Moody's: Caa1
	Standard & Poor's: B
Distribution:	Rule 144A and Regulation S

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