Chase Securities Inc. was expected late Thursday to price a $750 million private high-yield offering for Iridium LLC, a Washington-based global wireless communications company.
The issue-originally set for $500 million but bumped up by investor demand-was expected to price to yield 13%, investors said Thursday.
Initially set to be split between $250 million of zero coupon bonds and $500 million of senior notes, the issue was restructured late in the day.
The zero coupons, which tend to be volatile, were dropped due to weak investor demand, while the amount and yield of the senior notes were increased.
The offering also includes equity warrants, which give investors the option to buy stock within a year of the issue.
The Iridium securities, which come due in 2005, are sure to be closely watched. The company, which uses satellites to provide worldwide paging, voice, fax, and data services to business travelers, has faced significant challenges in the capital markets.
Investors question what kind of demand there will be for wireless communications and note that 7% of the satellite launching vehicles fail to achieve orbit.
Indeed, Iridium, which is 25% owned by Motorola Inc., had trouble completing an initial high-yield offering through Goldman, Sachs & Co. last year.
But the environment has dramatically changed for telecommunications issues. A robust high-yield market, strong economy, and growing investor comfort with telecom have ushered in a new era of financing for companies like Iridium.
"Telecom investors are more comfortable with satellites than they were when the issuers originally came to market," said David Wells, a telecom analyst at Bear, Stearns & Co.
Officials from Chase Securities, the brokerage arm of Chase Manhattan Corp., and Iridium could not be reached for comment.
Iridium has earned its stripes lately. The company has successfully launched 17 of a planned 66 satellites-including five Wednesday. It said Thursday that paging messages had been received from its first satellite.
Globalstar LP, a joint venture between Loral Space and Communications and Qualcomm, successfully raised $500 million in February through a high- yield issue led by Lehman Brothers. Globalstar did an additional $325 million financing in June, led by Bear, Stearns.
"I truly believe that there's room for multiple players in the international satellite" industry, said Douglas Conn, a high-yield analyst at Lehman.
For telecom bonds like Iridium's, size, pricing, and structure are secondary to the fact that "investors are deciding that, operationally, these companies will succeed," Mr. Conn added.
Last July, BZW, the U.S. investment banking arm of Barclays PLC, and Chase Manhattan Bank led a $750 million bridge loan for Iridium, which was guaranteed by Motorola.
In June, Iridium World Communications Ltd., the funding unit of Iridium, raised $225 million through an initial public offering managed by Merrill Lynch & Co. The offering, which originally went out at $20 per share, was five-and-a-half-times oversubscribed, according to people familiar with the deal.
In the fall, Chase and BZW will close an additional $750 million limited-recourse facility, still subject to documentation, according to a lender involved in the deal.
"They are funded through completion, and that is a very significant milestone," the lender said. "Clearly the financial market has accepted the Iridium story."
