Fitch Affirms Intelsat's IDR at 'B'; Rates $600MM Senior Notes 'CCC+/RR6'

Business Wire, Jan 16, 2007

CHICAGO -- Fitch Ratings has affirmed Intelsat, Ltd.'s Issuer Default Rating (IDR) at 'B'. The Rating Outlook is Stable. A detailed list of Fitch's rating actions appears at the end of the press release.

Fitch has assigned the following new ratings:

Intelsat (Bermuda), Ltd. (Intelsat Bermuda).

--$600 million senior unsecured floating-rate notes due 2015 (issued under Rule 144A) 'CCC /RR6';

--Proposed $1 billion guaranteed senior unsecured term loan due 2014 'BB-/RR2'.

The senior notes will be used to refinance the $600 million senior unsecured credit facility of Intelsat Bermuda, which is a subsidiary of Intelsat, Ltd. (Intelsat). The proceeds from the term loan will be used to refinance $1 billion of senior unsecured floating-rate notes due 2012 that had been issued by Intelsat Subsidiary Holding Company (Intelsat Sub Holdco). The term loan is guaranteed by Intelsat, Intelsat Sub Holdco and certain Intelsat Sub Holdco subsidiaries.

Intelsat's ratings reflect the strength and scale of the company, owing to its position as the largest fixed satellite services operator following the acquisition of PanAmSat Holding Corporation on July 3, 2006, the high proportion of revenues from contract services, the company's diverse revenue base, and strong operating cash flow. Concerns include the company's significant leverage following the debt-financed PanAmSat acquisition, competition from fiber-optic cable providers in certain legacy portions of the business, and in the longer term, the capital intensive nature of the satellite business.

As of Sept. 30, 2006 the company's revenue backlog was approximately $8 billion, or approximately 3.8 times (x) the pro forma last twelve months revenue. Approximately 95% of the backlog is related to non-cancellable contracts or contracts with substantial termination penalties. In the third quarter 2006, which incorporated nearly a full quarter of results from PanAmSat, 38% of Intelsat's revenues were derived from the media sector, 47% from voice and data services provided to corporate customers, 14% of its revenues were from government services and 1% of its revenues were from other services. Geographically, in the third quarter of 2006, 50% of its revenues came from North American customers, while Europe and Africa/Middle East each produced 15% of revenues. The remaining revenues were divided between Asia (8%) and Latin America (12%).

The fixed satellite services segment is characterized by its high operating EBITDA margins. Intelsat's EBITDA margins on a quarterly basis have generally been in the 60-70% range over the past two years. Following the acquisition of PanAmSat for $6.4 billion in cash and assumed debt, Intelsat's debt increased to $11.3 billion at Sept. 30, 2006. Debt-to-EBITDA was 7.45 times (x) at Sept. 30, 2006, based on annualized EBITDA for the third quarter (which reflected nearly a full quarter of PanAmSat's results).

Liquidity is provided by cash on hand and two credit facilities. Cash on hand amounted to $497 million at the end of the third quarter of 2006. Credit facilities consist of an undrawn $300 million credit facility due 2012 located at Intelsat Sub Holdco and a $250 million facility due 2012 at indirect subsidiary Intelsat Corporation (formerly PanAmSat Corporation). The Intelsat Sub Holdco facility has a financial covenant restricting pro forma senior secured leverage to no greater than 1.5x at the end of each fiscal quarter, and the Intelsat Corporation facility requires pro forma senior secured leverage to be no greater than 4.25x at the end of each fiscal quarter. The $1 billion credit facility at Intelsat (Bermuda) contains a leverage covenant of 6.75x, as do the senior unsecured notes of Intelsat (Bermuda) and Intelsat Corporation.

Fitch has affirmed the following ratings:

Intelsat, Ltd. (Intelsat)

--Issuer Default Rating (IDR) 'B';

--Senior unsecured notes 'CCC/RR6'.

Intelsat (Bermuda), Ltd.

--Issuer Default Rating (IDR) 'B';

--Senior unsecured guaranteed notes 'BB-/RR2';

--Senior unsecured non-guaranteed notes 'CCC /RR6'.

Intelsat Intermediate Holding Company, Ltd. (Int Holdco)

--Issuer Default Rating (IDR) 'B';

--Senior unsecured discount notes 'B-/'RR5'.

Intelsat Subsidiary Holding Company, Ltd. (Sub Holdco)

--Issuer Default Rating (IDR) 'B';

--Senior secured credit facilities 'BB/RR1';

--Senior unsecured notes 'BB-/RR2'.

Intelsat Corporation (f/k/a PanAmSat Corporation)

--Issuer Default Rating (IDR) 'B';

--Senior secured credit facilities 'BB/RR1';

--Senior secured notes 'BB/RR1';

--Senior unsecured notes 'B/RR4'.

In addition, Fitch has withdrawn the following rating due to its refinancing:

Intelsat (Bermuda), Ltd.

--$600 million senior unsecured credit facility 'CCC /RR6'.

Intelsat Holding Corporation (f/k/a PanAmSat Holding Corporation)

-- Issuer Default Rating (IDR) 'B' (entity is no longer an issuer).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.