Mexico's Satmex inks deal for satellite launch, gets covenant waivers

By Caroline Salls

Pittsburgh, Dec. 27 - Satelites Mexicanos, SA de CV (Satmex) has entered into a contract for launch services with ILS International Launch Services, Inc. for the launch of its Satmex 8 satellite, which is currently being developed and built for Satmex by Space Systems/Loral, Inc. to replace the existing Satmex 5 satellite, according to a 6-K filed with the Securities and Exchange Commission.

According to Satmex's estimates, the total Satmex 8 program, including construction, launching and insurance, will cost about $350 million.

Amounts due to ILS for launch services under the agreement are payable in installments over the 19-month period following the execution of the agreement.

The company said the payments to be made under the launch services agreement can be deemed to exceed the level of capital expenditures that Satmex may make or commit to make under the indentures governing its first-priority senior security notes due 2011 and second-priority senior security notes due 2013.

As a result, the company obtained waivers of some indenture covenants to allow it to enter into both the launch services agreement and the satellite construction agreement with SS/L for the design and construction of Satmex 8.

Satmex said it will make up to $100 million of cash payments in connection with the waiver and will require further waivers from the noteholders or alternative financing arrangements in order to make the payments under the agreement that exceed the amounts permitted under the waiver.

Satmex said it expects Satmex 8 to be ready for shipment to the launch site by July 2012, and the launch services agreement with ILS provides for a launch in the third quarter of 2012.

Satmex can terminate the launch services contract following written notice at any time until 30 days before the launch date, according to the 6-K.

In the event of an early termination, ILS is entitled to keep a portion of the launch service price. This portion would increase based on the proximity of the termination date to the beginning of the launch period.

Satmex is a Juarez, Mexico-based satellite coverage provider.

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