Sea Launch Lenders Willing To Refinance Company’s Debt

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Sea Launch Co. has received indications from its banks that they are willing to refinance the $250 million in Sea Launch debt coming due in June given the continued loan guarantees provided by Boeing Co., Sea Launch President Kjell Karlsen said Feb. 12.

In an interview, Karlsen also expressed confidence that the Long Beach, Calif.-based company, which is introducing its Land Launch variant this year, will be able to secure cash commitments this year from Sea Launch’s shareholders.

“We have talked to five of our core banks and they are all saying that this is something that can be done,” Karlsen said of the debt refinancing. “They are all basically Boeing banks, and with Boeing’s AA credit rating, this is feasible.”

Karlsen said that Sea Launch may also seek a private placement of additional debt if market conditions permit. The company did just that in 2005, for $100 million. “Today that market is still available to us,” he said.

In addition to its loan repayment deadline, Sea Launch this year will need additional cash from its shareholders for ongoing operating costs of the business. In a Feb. 9 filing with the U.S. Securities and Exchange Commission, Boeing made reference to “Sea Launch’s ongoing liquidity challenges” and said: “We continue to look at alternatives to address funding requirements for the future.”

Karlsen said Boeing has indicated it would be willing to put fresh cash into Sea Launch, but only as part of an effort by all the company’s shareholders. Karlsen said Sea Launch is in discussions with its Russian, Ukrainian and Norwegian shareholders to determine the level of recapitalization they would accept.

Sea Launch has lost money for the past three years, but commercial launch prices have been rising in recent months and Karlsen said he is confident of shareholder support. “These companies have been backing us for 10 years and I expect they will continue to do so,” Karlsen said. “I have been hearing about Sea Launch’s imminent demise for the 10 years I have been with the company.”

With commercial credit markets remaining tight worldwide, several current and prospective commercial satellite operators are seeking to do business with only those satellite builders and launch- services providers that can tap into their nations’ export-credit agency financing.

Karlsen said Sea Launch has discussed the issue with the U.S. Export-Import Bank, which he said has concluded that Sea Launch meets the threshold conditions – mainly content levels – for recipients of export-credit assistance.

Sea Launch operates an ocean-going platform and associated command ship to launch the Zenit-3SL heavy-lift rocket from the equator in the Pacific Ocean. The rocket is built mainly by Russian and Ukrainian companies.

Chicago-based Boeing is Sea Launch’s system prime contractor and owns 40 percent of the company. Aker ASA Group of , which converted a Sea oil rig into the Sea Launch Odyssey launch platform, and also built the Sea Launch commander ship, owns 25 percent of Sea Launch.

RSC Energia of Korolev, which builds the Block DM upper stage for the Sea Launch rocket, has a 20 percent stake. SDO Yuzhnoye/PO Yuzhmash of Ukraine, which build the Zenit rocket’s lower stages, own a combined 15 percent of the company.

With its shareholders spread over three nations, Sea Launch cannot count on a single nation’s export-credit agency to finance a satellite operator. Karlsen acknowledged that this puts Sea Launch at a disadvantage against’s Arianespace consortium, which is majority French-owned and can count on support from’s Coface export-credit agency.

Earlier this month, ‘s Gazprom Space Systems of Moscow ordered two mainly French-built telecommunications satellites, and two Ariane 5 launches for them, in part to maximize the amount of Coface financing the project could receive.

Gazprom’s two-satellite contract, with ThalesAlenia Space of, is to build the two spacecraft and deliver them into orbit.

Karlsen said such an arrangement with a satellite builder, in which a Sea Launch contract is embedded into a larger contract signed by the satellite builder with the satellite operator, is Sea Launch’s best likely chance to benefit from Export-Import Bank financing.