SingTel Banks Said to Plan Debt Package for Optus Satellite Sale

Morgan Stanley and Credit Suisse

Group AG will offer a highly-leveraged debt package to help

Singapore Telecommunications Ltd. (ST) sell its Optus Satellite

division, according to three people familiar with the matter.

The banks, hired in March by Southeast Asia’s largest phone

company to look at options for the Australian unit, will offer

the pre-arranged funding to potential buyers, the people said,

declining to be named as the details are private. Information

memorandums for the sale will be sent out within two weeks, one

of the people said.

A sale of the division, which Nomura Holdings Inc. said may

be worth A$2 billion ($2 billion), would provide cash for

acquisitions as the company, known as SingTel, rolls out a

mobile network in Australia amid mounting competition that’s

curbing growth in Optus, its biggest unit by sales. SingTel

today said it plans to spend S$2 billion ($1.6 billion) on

acquisitions after fourth-quarter profit fell 33 percent.

Michele Batchelor, a Singapore-based spokeswoman for

SingTel, declined to comment on the proposed financing.

Optus Satellite has five satellites in orbit with a sixth

to be launched this year, and in 2011 signed a five-year, A$200

million deal to provide support to NBN Co., which is building a

national broadband network in Australia.

High Leverage

A number of parties had signed confidentiality agreements

to look at the unit, two of the people said.

The banks may offer a high level of leverage, lending more

than six times Optus Satellite’s earnings before interest, tax,

depreciation and amortization, two of the people said. Among

more than 200 telecommunications companies globally with sales

higher than $100 million, the average net debt to Ebitda ratio

was 2.01 and the median was 1.16, according to data compiled by

Bloomberg.

Optus Satellite had revenue of A$319 million last financial

year, according to SingTel, which doesn’t disclose earnings for

the unit.

The banks could finance the deal through either high-yield

bonds or the U.S. term loan B market, the two people said.

The debt package would aim to attract bidders including

strategic buyers, infrastructure investors and private equity

firms that have previously bought satellite businesses, the

people said.

Potential buyers include European and north American

satellite companies, such as Intelsat Global Holdings SA,

Eutelsat SA, SES (SESG) SA, and Inmarsat Plc (ISAT), as well as infrastructure

funds, Jeffrey Tan, an analyst at OSK Holdings Bhd. (OSK), said in

March.

A sale will face hurdles because of the national security

implications of selling satellites that carry Australia’s

defense communications, said Simon Morris, a Melbourne-based

partner with Corrs Chambers Westgarth who’s given legal advice

on cross-border transactions, in a March interview. It would

also need to be approved under U.S. rules on the export of

satellite technology.

To contact the reporter on this story:

Paulina Duran in Sydney at

pduran10@bloomberg.net

To contact the editor responsible for this story:

Michael Tighe at

mtighe4@bloomberg.net

SingTel Banks Said to Plan Debt Package for Optus Satellite Sale