January 18, 2008 / 7:56 PM / 12 years ago

RLPC-Intelsat asks existing lenders to finance LBO

NEW YORK, Jan 18 (Reuters) - Banks backing the leveraged buyout of satellite operator Intelsat are asking its existing lenders to finance the purchase instead of selling a new financing in the open market, lenders told Reuters LPC.

Credit Suisse, which is the lead underwriter backing BC Partners purchase of a 76 percent stake in the company and its subsidiary PanAmSat, is asking lenders to allow them to keep loans in place rather than being replaced with a new and more costly debt package.

Credit Suisse, along with Bank of America and Morgan Stanley, agreed last June to provide BC Partners a $5.1 billion financing to finance its purchase of the commercial satellite operator.

Since then, conditions in the credit markets have deteriorated sharply and have made the task of selling debt extremely difficult for banks.

IntelSat and PanAmSat’s bank loans currently have a spread of 175 basis points over the London interbank offered rate (Libor) and 200 basis points over Libor, which would be extremely difficult to retain if the loans were to be refinanced under current market conditions.

This can potentially leave the Credit Suisse-led underwriting exposed to their commitment.

If Credit Suisse’s proposal is accepted, it would be relieved of the task of refinancing the bank loans for Intelsat and PanAmSat. New financing would still be required to finance the purchase, but the amount needed would be much smaller than the $5.1 billion commitment, as lenders would have agreed to roll the existing credit agreement into the new company.

The terms of Credit Suisse’s proposal are unusual in that the bank is asking lenders to loosen the definition of a “change of control” clause in the existing credit agreement. Usually, this clause will trigger a repayment of bank debt, but under the current proposal, a change of control would not be triggered.

IntelSat has in place a $344 million term loan B and a $300 million revolver. The company also has in place a $1 billion unsecured term loan. PanAmSat has in place a $1.6 billion term loan B, a $355 million term loan A and a $250 million revolver.

Reporting by Faris Khan;Editing by Richard Satran

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