With its debt coming down in a low-interest-rate environment, and its revenue going up with two new satellites in service — 6 percent in 2013 in Canadian dollar terms — Telesat is doing what it takes to pretty itself up for a buyer — again.
The attempted sale of Ottawa-based Telesat several years ago collapsed when its owners — PSP Investments, a Canadian pension fund, and New York-based Loral Space and Communications — asked more than the market would bear.
With Loral now having some clarity as to what the damages might be from the satellite patent violation lawsuit brought by former customer ViaSat Inc., and with Loral’s satellite manufacturing division now sold to Canada’s MDA Corp., Loral appears to have its eyes set on a tax-free or low-tax sale of Telesat.
If Loral and PSP can agree on a price that fetches a buyer, the question is whether the new owner will, like its predecessor, load Telesat with debt at a time when the company might be thinking of growth opportunities.
Leveraged buyouts of reliable-cash-flow satellite operators by private-equity investors or other financial investors uninterested in the business per se used to be fashionable. Private equity was said to bring discipline to an industry whose members were derided as cap-ex junkies.
In addition to preparing its house for sale, Telesat has been making modest investments. A decision to add, on speculation, an X-band payload to the Anik G1 satellite over the Pacific proved prescient as Airbus Defence and Space purchased the entire capacity for its global military services business. Telesat recently ordered a high-throughput satellite, called Telstar 12 Vantage, using Ku-band from Telesat’s 15 degrees west orbital slot, and selected Mitsubishi Heavy Industries’ new-version H-2A rocket. The launch is scheduled for late 2015.
