Satmex noteholders threaten to accelerate payment on notes

By Carlise Newman

Chicago, Nov. 17 - Satélites Mexicanos SA de CV said its noteholders have told it they will accelerate payment on its 10 1/8% senior notes due Nov. 1, 2004 if talks on restructuring the debt do not move forward by Monday.

An acceleration could result in Satmex filing for Chapter 11 bankruptcy protection, the company added in a filing with the Securities and Exchange Commission.

Satmex did not make the $16.2 million interest payment due Aug. 1 on the 10 1/8% notes, also triggering a cross-default provision on its senior secured floating-rate notes due June 30, 2004.

Satmex said Monday in an SEC filing that on Nov. 11 its board of directors received notice from the ad hoc committee of holders of its 10 1/8% notes "that, if negotiations with the committee do not move forward in a manner that is satisfactory to the committee by Nov. 17, 2003, the committee will feel compelled to accelerate the fixed rate notes and take other actions necessary to protect its interests as holders of fixed rate notes." The committee represents holders of more than 70% of the 10 1/8% notes.

Satmex said it did not make the payment on the notes in order to conserve cash so that it could insure and launch its new Satmex 6 satellite, currently scheduled to lift off between Dec. 15 and Jan. 15, 2004.

On Sept. 30, an additional default occurred under the floating-rate notes as a result of the company's failure to complete export credit agency-backed financings by that date. Satmex's parent company, Servicios Corporativos Satelitales SA de CV, defaulted on its debt obligation to the Mexican government on Sept. 30 as a result of its failure to maintain a minimum coverage ratio, which in turn caused another cross-default with the floating rate notes.

Satmex has approached holders regarding a possible restructuring of the 10 1/8% notes, including a maturity extension, but has not reached any agreement, according to the filing early Monday.

Satmex filed a registration statement with the U.S. Securities and Exchange Commission relating to a proposed exchange offer for the notes on July 21, 2003, but it has not become effective.

Satmex has continued to work toward the completion of the financing for the launch of Satmex 6 with Private Export Funding Corp. and Société Générale. In October, Satmex 6 was completed, and it is currently in Kourou, French Guiana awaiting launch. In order to launch Satmex 6, Satmex must complete payment of the launch insurance premium and other related payments.

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