PanAmSat heads lower on Intelsat buyout news; Delphi levels reverse on union, GM negotiation worries

By Sara Rosenberg

New York, Aug. 29 - PanAmSat Holding Corp.'s bank debt dipped lower on the Intelsat Ltd. purchase news as investors are now expecting some sort of pay down, but levels are not heading all the way down to par just yet since the transaction is still a ways off from completion.

Meanwhile, Delphi Corp.'s bank debt weakened on Monday as investors were bombarded with press throughout the weekend on the state of negotiations between General Motors Corp. and the United Auto Workers (UAW) that fueled some concern over the likeliness of a quick resolution to matters.

PanAmSat's bank debt gave up about three eighths to a half of a point on Monday as news emerged that Intelsat will be purchasing the company, sparking some to think that a refinancing is inevitable, according to a trader.

However, bank debt levels only dropped to par ½ bid, 101 1/8 offered - not to the typical par levels seen on repayment expectations - because the buyout could take anywhere from six to 12 months to close, the trader said.

"It will take a while for that deal to get done. People will quote it higher for the yield to call. It should eventually work its way down to par," the trader explained.

Under the acquisition agreement, Intelsat will pay $25 per share in cash, or $3.2 billion, for PanAmSat to create one large Pembroke, Bermuda-based satellite company with U.S. headquarters in Washington, D.C. The company is expected to have pro forma annual revenues of more than $1.9 billion and to maintain significant free cash flow from operations, providing significant resources for capital expenditures and debt service.

In addition to the purchase price, Intelsat will either refinance or assume about $3.2 billion in debt of PanAmSat and its subsidiaries.

Intelsat has received financing commitments for the full amount of the purchase price from Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc.

A substantial portion of the financing for the transaction is expected to be raised at Intelsat (Bermuda) Ltd., with additional financing expected to be raised at PanAmSat Holding Corp., PanAmSat Corp. and Intelsat Subsidiary Holding Co. Ltd.

Prior to this financing and the closing of the transaction, Intelsat (Bermuda) Ltd. is expected to transfer substantially all of its assets and liabilities, including its 9¼% senior discount notes due 2015, to a newly formed wholly owned subsidiary.

The transaction is expected to result in a change of control, as defined in the indenture governing PanAmSat's outstanding bonds.

Completion of the buyout is subject to PanAmSat shareholder approval, customary closing conditions and regulatory clearances, including the appropriate U.S. government antitrust authorities and the Federal Communications Commission.

Delphi heads lower on negotiation concerns

Delphi's bank debt fell off by about half a point during Monday's session as investors were a little worried that negotiations between GM and the UAW may not move along quite as fast as was hoped for as news surfaced that the union is not willing to make all the concessions that were asked of it.

Delphi's term loan was quoted at 102½ bid, 103 offered by one trader and 102½ bid, 103½ offered by a second trader.

The company's revolver was quoted at 95 bid, 95½ offered by the first trader and 95 bid, 96 offered by the second trader.

"UAW said they wouldn't support all the concessions [so] they're both a little lower," the first trader said about Delphi's term loan and revolver.

"It's no surprise whatsoever," the second trader said about the UAW not wanting to support the entire GM proposal. "I think people are realizing from all the press this weekend that these negotiations are not going as smoothly or as quickly as everyone may have hoped."

Delphi is looking to GM for some sort of financial buyout, while looking to its major unions to seek modifications required to implement its restructuring plan.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

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