In November 2009, Israeli developer SpaceCom closed the $140 million financing for its Amos 5 telecommunications satellite. The first project of its kind to be arranged solely by institutional investors – Migdal Insurance Company and Amitim Pension Fund – the deal was an innovation in debt sourcing spawned by bank illiquidity and heightened aversion to risk. Migdal and Amitim negotiated themselves comfort on the project debt via junior liens over two previous satellite financings – Amos 2 and 3 – and a strong security covenant over the Amos 5 project.

SpaceCom went out to the Israeli bank market in the autumn of 2008, approaching the same banks that had financed other, similar satellite projects. The lenders were interested in providing senior debt for Amos 5, but, given the effects of the financial crisis, demanded that SpaceCom provide an owners' guarantee on any loan, covering the contracts and assets of the proposed satellite. The sponsor, having a strong track record in satellites and satellite financing, was surprised that the banks suddenly had no appetite for the risk and began to canvas a broader investor base.

In January 2009, SpaceCom approached insurer Migdal, which, seeing an opportunity to take a first step into lead arranging on a project financing, took on the deal. Migdal brought Amitim in on a joint arranger basis in May to satisfy its credit committee that project risk was being shared. Migdal is one of Israel's older insurance firms, and is known for its conservative market position, so a move into lead arranging on a satellite project financing was at best unusual. Shortly after joining with Amitim, Migdal mandated Tadmor & Co as legal adviser to the lenders.

The $140 million debt has a maturity of around nine years – a two-year construction period, a two-year grace period and a five-year term. During construction, small drawdowns of around $20 million are made on a quarterly basis (the first drawdown took place on 10 November 2009, the second the following January). Each drawdown is priced separately using a fixed, undisclosed, spread against the Israeli consumer price index. After a two-year post-construction grace period, the interest rate on the debt is a fixed average of these rates. With a total project cost of $200 million, the equity portion is $60 million. Minimum DSCR is 1.05x.

The debt for Amos 5 is supported by junior securities over cashflows from SpaceCom's existing Amos 2 and Amos 3 satellites, the construction of which was financed using bank and bond debt respectively. In the case of default, which would be triggered by the project dropping below a DSCR of 1.05x, the lenders would also have recourse to the cashflows and physical assets of Amos 5, including rights to the lease on the position in the Earth's orbit where the satellite will operate.

According to, Itzhak Shnaiberg, deputy CEO of SpaceCom: "This deal was a real win-win for us and our financiers. It's unique in terms of its pricing, which follows the consumer price index and works very well for us. It's also unique in its structure, the way in which Migdal and Amitim arranged to take security on all Amos 5 assets and cashflows, as well as subordinated security on Amos 2 and Amos 3. We believe that these features make this a tool we'll use for our future financings with Migdal, Amitim and perhaps others."

Scheduled to begin service in early 2011 at 17°E – a new orbital slot over Africa – Amos 5, together with the Amos 2 and 3 satellites co-located at SpaceCom's 4°W orbital, is expected to position the company at the forefront of Africa's emerging satellite services market and is thus a key project and financing for the sponsor.

Once in orbit, Amos 5 will feature a fixed pan-African C-band beam and three steerable Ku-band beams – all covering Africa with connectivity to Europe and the Middle East and supporting multiple transponders in both C-band and Ku-band.
The satellite will offer a wide range of satellite services, including direct-to-home broadcasting; VSAT communications and broadband internet; telephony service; data trunking; cellular backhaul and video distribution.

Amos 5
Status: Financial close October 2009
Description: Financing of the development, launch and operation of Amos 5 telecommunications satellite
Sponsor: SpaceCom
Mandated lead arrangers: Migdal Insurance Company, Amitim Pension Fund
Sponsor legal counsel: In-house
Lender legal counsel: Tadmor & Co