Communications satellite operator Intelsat is seeking takeover opportunities after spending up to $1.1 billion on Loral's six-strong North American satellite fleet. But analysts fear more acquisitions could load the company with too much debt.
Chief executive Conny Kallman says: "We will continue to look for consolidation opportunities to expand our geographical coverage or shift our focus to areas such as corporate networks or video." He adds: "Our priorities are to close the Loral deal and complete our IPO [initial public offering]. We have a lot on our plate for the first half of 2004."
Analyst Rosemarie Kalinowski of Standard & Poor's reacted to the news by changing the outlook for Intelsat's debt from "stable" to "negative", saying she was concerned about the risk involved in pursuing and integrating opportunistic acquisitions. However, she says, the company is set to improve as it diversifies into video and government services, and so the debt itself has not yet been downgraded.
Intelsat had $2.4 billion in debt at the end of 2003 - a figure which will rise sharply when the company completes its purchase of Loral's North American fleet for up to $1.1 billion by the end of April. Kallman says he cannot guarantee that any future takeovers will not damage the company's debt rating further.
The Loral purchase, agreed last year, may fall in price.Kallman says: "Loral's backlog is $463 million, which is a little short of where we wanted it to be. There are a couple of other closing conditions, which we are discussing with them."
Following the purchase, Intelsat's IPO will take place before the end of June and should raise up to $500 million, Kallman says.
Earlier this month, Intelsat reported sales of $952 million and net profits of $274 million in 2003.
Source: Flight International
