February 26th was another bad day for investors in Intelsat. Its already plummeting share price fell a dramatic 20 per cent, from $2.14 to $1.69 and taking its market capitalisation down to $181 million.
The fall means that Intelsat’s share price has tumbled over the past 12 months from $12.93 to its current $1.69.
However, in reality the collapse is even more troubling given that Intelsat mounted an Initial Public Offering less than three years ago (in April 2013) and when it raised almost $348 million in Common Stock (and another $150 million in Preferred Shares) in its flotation. Its Common shares were priced at $18 each and trading commenced on the New York Stock Exchange.
The Preferential shares have enjoyed a 5.75 per cent interest payment per annum, but that privilege comes to an end this coming May 1st when the Preferred shares automatically get converted to ‘ordinary’ shares.
Intelsat was established in 1964. In 2004 a group of Private Equity funds (including Apollo Global Management, Madison Dearborn, Apax Partners and Permira Advisors) had taken control of the business and paying $3 billion for the company. In August 2004 Intelsat took on another chunk of debt when it bought rival PanAmSat for $3.2 billion.
In 2008 a consortium of private equity funds (led by BC Partners Ltd and Silver Lake Management) bought the company. Intelsat’s valuation was reported at the time to be some $5 billion although the new buyers also assumed more than $11 billion in debt.
That debt has grown to today’s $14.75 billion, and interest on this burden is costing Intelsat a very large slice of its trading profits. Last September, London’s Financial Times reported that Intelsat was considering disposing of assets. Intelsat at the time said that none of its assets were non-core.