PARIS — Mexican satellite-fleet operator Satmex, which is being sold by its owners in an auction to be completed this summer, has received non-binding inquiries from “most of the big U.S. and European satellite operators” and has set a March 20 deadline for receipt of first-round offers, Satmex Chief Executive Raul Cisneros said March 16.
The Satmex board of directors is scheduled to meet March 22 with its financial advisor Morgan Stanley to sift through the initial responses and determine how many bidders to invite into the second and final round, Cisneros said.
Starting March 23, the second-round bidders will have full access to Satmex’s data room, which in this case means Internet access to the company’s internal financial accounts, to provide a clearer picture of Satmex’s assets and liabilities.
On April 10, Satmex will hold, in Mexico, a series of management presentations that will be given to each remaining bidder so they can ask questions that could not be answered just by access to the data room.
Final bids for Satmex will be due by late May, with a Satmex board decision expected in the weeks that follow.
“There is a highly competitive bidding process that we expect from the interest we have received so far,” Cisneros said in an interview. “We expect that most of the early bidders will be permitted into the second round. We also have received expressions of interest from Mexican investors. How these investors will team with non-Mexican satellite operators in the final bidding is not known, but we expect this to occur.”
Under Mexican law, a majority of Satmex’s voting rights must remain in Mexican hands, meaning that the winning bidder will need a Mexican partner .
The big question for investors — and a measure of how much value they place on Satmex — is whether any of the bids will exceed the $569 million threshold set by the Mexican government as the minimum amount needed to keep the government out of the post-sale equity mix of Satmex.
Satmex operates three telecommunications satellites. Its most valuable asset, Satmex 6, was launched in mid 2006 and carries 36 C-band and 24 Ku-band transponders. Two C-band and two Ku-band transponders are owned by Loral Space and Communications, a former Satmex shareholder and the builder of the Satmex 6 satellite, following a 2006 agreement relating to work Loral did to prepare Satmex 6 for launch.
Cisneros said Satmex 6’s Ku-band capacity is “almost full,” and that the C-band capacity is selling more slowly. Satmex 5, a smaller satellite, is also nearly full. Solidaridad-2, the company’s oldest satellite, is scheduled to be at least partly retired in late 2008. It could be put into inclined orbit to save fuel and continue partial commercial service, but otherwise will not be much of a revenue-winner after 2008.
Satmex has prepared specifications for a Satmex 7 satellite but will not order a new satellite until the new owners have a chance to review strategy. Cisneros said that if a large satellite-fleet operator takes control of the company, the new owner’s existing fleet may include a satellite that could be moved into the Solidaridad-2 position to avoid losing access to the slot.
Satmex reported revenues in 2006 of $79 million, a 13 percent increase over 2005, which is in part due to Satmex 6’s arrival at mid year. EBITDA, or earnings before interest, taxes, depreciation and amortization, was $44 million, or 56 percent of revenue.
Satmex, which in 2006 emerged from Mexican bankruptcy proceedings similar to the U.S. Chapter 11 process, is now 78 percent owned by its bondholders, many of them U.S.-based; and 20 percent owned, directly or indirectly, by the Mexican government; and 2 percent by Loral and the Servicios holding company of Mexico .
Cisneros, who assumed his current position in December, said he has focused the company on refraining from signing any marginal or unprofitable contracts, even if that means letting large customers sign up with competing satellite operators.
“Prices [of commercial satellite capacity] in South America are very low, and we are now making sure that whatever contracts we sign will be clearly profitable,” Cisneros said, adding that he does not want to saddle the new owner with a backlog of money-losing customer commitments.
Satmex currently has a work force of about 200 people. Cisneros suggested that the new Satmex owner may wish to relocate its satellite-operations business in low-cost Mexico rather than shut down the Satmex operating center to consolidate operations in the United States or Europe.
“With a very small investment, our operating facility, which today handles three satellites, could handle eight spacecraft,” Cisneros said. “It’s that kind of synergy we would invite the new owners to consider.”
