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Viasat’s debt ratings adjusted by Fitch

January 19, 2024

Fitch Ratings has affirmed satellite operator Viasat and its subsidiaries’ Long-Term Issuer Default Ratings (IDRs) at ‘BB-‘ and removed all ratings from Rating Watch Negative (RWN) – which is good news for the company.

Fitch has resolved the RWN as it expects Viasat’s debt leverage to decline and sustain within the current EBITDA leverage sensitivities range of 4x-5x within the agency’s rating horizon. The Negative Outlook reflects Fitch’s expectation that the company will be Free Cashflow (FCF) negative until FY 2026, although the agency expects an improving FCF trajectory. Fitch expects FCF deficits over the next 18-24 months, as the company funds its satellite build programme.

“Viasat’s rating reflects stable revenue growth, increasing EBITDA margins from the Inmarsat acquisition and related synergies, and declining EBITDA leverage,” says Fitch.

The ratings agency adds: “Viasat is in the midst of a high capex period as it builds three third-generation, high-throughput satellites at a total cost of $2 billion or more. The company is also constructing seven other Ka-band satellites acquired from Inmarsat. The first, ViaSat-3 (Americas), was launched in April 2023, but was impaired due to a problem with reflector deployment. Fitch expects capex to remain high but decrease from current levels, as ViaSat-3 (EMEA) and ViaSat-3 (APAC) are launched.”

Viasat expects ViaSat-3 (APAC) to launch in the fourth quarter of CY 2024, while the launch of Viasat-3 (EMEA) is uncertain as it awaits corrective action to the antenna. ViaSat-3 (APAC) has a reflector from a different antenna manufacturer and therefore the timing of its launch is not expected to be affected by the anomaly.

Viasat had a $3.6 billion backlog as at September 30th 2023. The company does not include amounts in its backlog if the company does not have purchase orders. As of September 30th 2023, Viasat provides in-flight internet services to over 3,350 active commercial aircraft, with 1,600 aircraft in its backlog. A majority of the company’s IFC contracts are for a period of five to 10 years.

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