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Inmarsat placed on review for downgrade following $3.4b takeover

Publication Date: 28 Mar 2019 - By ReachX Team By ReachX Team
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Equity Fundamental Equity UK Telecom & Media

The corporate ratings of Inmarsat have been put on review for a downgrade by Moody’s following a buyout of the company earlier this week.

The decision follows a move by Triton Bidco (a new joint venture company formed by private equity groups Apax and Warburg Pincus alongside Canada's CPPIB and Ontario Teachers' Pension Plan Board) to acquire Inmarsat in a deal that values the UK group's equity at $3.4bn. 

Triton Bidco will pay $7.21 (including $0.12 per share of final dividend) in cash per Inmarsat share and will take the entire group private. The company will keep its headquarters in the UK and keep its R&D spent consistent with past levels.

The offer represents a 27% premium to the closing price of £4.31 per Inmarsat share on 18 March 2019. Including debt, the offer values the company at around $6.0bn. The cash consideration payable to Inmarsat's shareholders of $3.4bn will be financed by a combination of equity (for which commitment letters are already in place) and debt. 

Triton Bidco has recently entered into an interim facilities agreement comprising of $3.6bn term loan and $600m of revolving credit facilities, proceeds of which will be used to part-fund the cash consideration.

Moody's has placed on review for downgrade Inmarsat’s Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating (PDR) as well as the Ba3 ratings on Inmarsat Finance plc's $1bn Senior Unsecured Global Notes due 2022 and $400m Senior Unsecured Global Notes due 2024, which are unconditionally guaranteed by Inmarsat Group Limited and Inmarsat Investments Limited. The outlook for both entities has been changed to rating under review from stable.

"The review for downgrade of Inmarsat's ratings reflects our expectationof increased leverage within the group after the buy-out transaction is complete. While the post-acquisition capital structure of Inmarsat currently remains unclear, the company will no longer be publicly listed and could end-up with a relatively more aggressive financial policy under private equity ownership," says Gunjan Dixit, lead analyst for Inmarsat at Moody’s.

The ratings review is contingent on the completion of the acquisition as has been announced, which is subject to Inmarsat's shareholder approval and regulatory approval, expected to complete by the end of 2019. 

Moody’s will assess Inmarsat's post-acquisition capital structure, financial policy and corporate governance, any changes in business strategy to be imposed by new owners, and evolution of the company's credit metrics.

The rating agency said the review could result in a “multi-notch downgrade” of Inmarsat's ratings depending on the magnitude of leverage and the financial and operational strategy of the group after change in ownership. 

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

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