Lehman Brothers and Donaldson, Lufkin & Jenrette launched a $475 million leveraged loan package Tuesday for Loral Space and Communication.
The new loan and an expected $295 million high-yield bond issue, also arranged by Donaldson and Lehman, will fund Loral's joint acquisition with its Mexican partner, Telefonica Autry Group, of Mexico's state-owned satellite company, Satelites Mexicanos, SA.
Meanwhile, Citicorp and J.P. Morgan & Co. are readying an $800 million loan package for another satellite company, Panamsat Corp., that is expected to come to market next week.
Lenders and industry observers said 1997 was one of the most active financing years ever for the satellite business, which generated more than $11.6 billion in syndicated loans alone, according to Securities Data Co.
This year should see at least as much financing for the growing satellite industry.
"We anticipate that these two deals (Loral and Panamsat) are the tip of the iceberg for satellite finance in 1998," said Peter Engel, vice president and head of the telecommunications investment banking group at J.P. Morgan in San Francisco.
One of last year's most notable financing deals-a Chase Securities Inc.- led high-yield bond offering last July for satellite communications company Iridium LLC-was such a hit with investors that the issue was raised to $750 million, up from a planned $500 million.
"Our (telecommunications) clients are increasingly interested in hybrid transactions that involve both the bank and public debt markets," Mr. Engel said.
The satellite industry has been fueled by improvements in technology and an increase in the number of applications for it, lenders said. Other factors include the development of emerging markets communications and global industry deregulation.
The three main sectors of the satellite industry - manufacturing, launch systems, and operations - are dominated by a few key players. Collectively, the three largest U.S. satellite manufacturers, Hughes Communications Inc., Loral, and Lockheed Martin, control 67% of the global marketplace for satellites either launched or under construction for launch from 1990 through 2001, according to Euroconsult, a telecommunications consultant.
"To control all elements of the supply chain, from manufacturing to satellite operations, leading industry competitors are seeking to develop and/or acquire operations within each major segment in the market," said one lender to the satellite industry.
Last October, Loral agreed to pay $490 million for Orion Network Systems Inc., giving it instant access to communications networks in Europe and providing for a presence in Asia, where Orion plans to offer service soon. And last March Loral acquired the Skynet satellite services unit from AT&T for $478 million, giving it a big presence in the United States.
