PARIS — Satellite fleet operator Satmex of Mexico has received approval from its bondholders to spend up to $100 million on a new Satmex 8 telecommunications satellite in return for increasing the interest rate Satmex pays on bonds due in 2011, a development that enabled Satmex to sign a firm satellite-construction contract with Space Systems/Loral, according to statements from the companies.
The agreement came soon enough for Satmex to win a commitment from Loral that Satmex 8, to carry 64 C- and Ku-band transponders, will be ready for launch by July 1, 2012. This will give Satmex enough time to place the satellite in operation before the current Satmex 5 spacecraft is forced into retirement.
Satmex has said that Satmex 5’s on-board fuel will run out in 30 months.
In making a $2 million down payment to Palo Alto, Calif.-based Space Systems/Loral in early April, Satmex said it could not conclude a definitive construction contract under its current debt covenants, which limit the company’s ability to spend cash.
Satmex had said that building, launching and insuring Satmex 8 would cost about $350 million, and that entering into a contract with Loral would require a cash investment of about $65 million in the five months following the contract’s signature.
In a May 7 filing with the U.S. Securities and Exchange Commission (SEC), Satmex said it agreed to sweeten the deal for holders of its bonds due in 2011 by raising the interest rate on the bonds. In return, the company said it has won its creditors’ approval to spend $100 million.
“Satmex will continue to evaluate its options with respect to financing for additional amounts that will be required for the Satmex 8 program,” the company said. It added that further interest rate increases on its bonds may be needed “upon specified events.” It did not detail a scenario in which it could free up $350 million in cash between now and mid-2012.
Satmex reported cash on hand of $102.4 million as of Dec. 31. The company reported 2009 revenue of $125 million, up from $114.7 million in 2008. Satmex operates three satellites.
The company in the past several years has survived Chapter 11 bankruptcy proceedings in the United States and Mexico but has been unsuccessful in attempts to auction itself, with bids falling below a pre-established minimum.
More recently, Satmex bondholders refused to permit the company to be sold to EchoStar Corp. of Englewood, Colo., apparently concluding that EchoStar’s bid was insufficient. Other operators interested in Satmex have expressed surprise at the Satmex situation, saying they would be unlikely to make better offers than EchoStar’s given Satmex’s condition.
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