Moody’s Investors Service doesn’t think much of Intelsat’s latest batch of borrowings, assigning an issue of $2 billion in unsecured debt at a B3 rating, and an even lower Caa1 rating to the satellite operator’s $635 million notes. However, Moody’s also reminds investors that Intelsat’s other debt are at much the same rating.
“While the transaction increases the proportion of debt at the B3 level to an inflection point affecting Jackson’s unsecured and unguaranteed notes, we have chosen to over-ride the model’s output, leaving those notes at Caa1 (rather than Caa2).”
The borrowings are made by Intelsat Jackson, a wholly-owned subsidiary of Intelsat Investments SA, based in Luxembourg.
“The new notes are being issued to fund redemption of Intelsat Luxembourg’s $1.68 billion 11.25 per cent senior unsecured notes due February 15th 2017, as well as to refinance $868 million of Jackson unsecured and guaranteed term loans due February 1st 2014. With Intelsat’s consolidated debt not materially affected, the transaction is leverage-neutral and does not affect Intelsat’s B3 CFR.
Similarly, since the transaction had previously been anticipated and has no incremental liquidity affect, Intelsat’s SGL-2 liquidity rating (indicating good liquidity) is unchanged,” says Moody’s.
The debt agency also says that Intelsat’s credit rating could rise: “With company guidance indicating a three-year period of lower-than-average capital spending, depending on plans for several satellites whose useful lives expire within four years, Intelsat has an opportunity to de-lever by way of debt reduction. Should this result in sustainable free cash flow to debt approaching/exceeding 5 per cent of debt (all measures incorporating Moody’s adjustments), positive ratings pressure could result. An upgrade would also depend on positive industry fundamentals, maintenance of solid liquidity and clarity on capital structure planning.”