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Inmarsat bond issue follows $8.5m Vizada discount

  • Friday, 16 November 2007 | News

Inmarsat has announced that it intends to make an offering of $265 million in principal amount of 1.75 per cent convertible bonds, due in 2017.

The net proceeds of the bond issue are expected to be used to fund directly or indirectly a loan that Inmarsat Finance III (Inmarsat III) has agreed to provide to CIP UK Holdings.

CIP Canada's acquisition of Stratos is expected to complete before the end of the year. The bonds are expected to be issued today.

In addition to the offering there is an increase option of $25 million in principal amount of the bonds that Inmarsat has granted to the joint bookrunners of the offering.

The bonds to be issued by the company are convertible into ordinary shares of Euro 0.0005 each of the company and are expected to have a semi-annual coupon of 1.75 per cent, a semi-annual yield to maturity / put in the range of 4.5 to 5 per cent, and a conversion premium of 25 to 30 per cent.

The bonds will be issued at 100 per cent of their principal amount and, unless previously redeemed, converted or cancelled, will mature on November 16 2017 at a redemption price of 134.25 per cent to 141.51 per cent.

The company says it will retain option to call the bonds after 7 years at their accreted principal amount under certain circumstances. The holder of each bond will also have the right to require the company to redeem such bond at its accreted principal amount at years 5 and 7.

The bond issue comes on the back of Inmarsat's Q3 financial reports, which saw shares in the company drop by 2.4 per cent on the back of lower than expected revenues for the period.

Despite a rise in sales in the three months to September 30 rose of 8 per cent, to $139.6 million, and an increase in pre-tax profits of 25 per cent, to $33.6 million, share values dropped 11.5p to 467.5p after Inmarsat detailed that revenues had been impacted by the merger between Vizada Satellite Communications, incorporating France Telecom Mobile Satellite Services, and Telenor Satellite Services.

The company explained that this merger had resulted in it granting large volume discounts to the newly combined users, resulting in an additional discount cost of up to $8.5 million.

Inmarsat has maintained that it will still hit upgraded forecasts for the year despite these developments.

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