North American Telecoms deal of the year
If one word can describe the shape of the telecom market in 1999 it
is holistic ? everything's connected. Merger fever, an
unprecedented volume of high-yields issuance, and breathtaking
technological advances make it difficult to take any sort of
stationary perspective on the top players' projects. In this
context FLAG Atlantic-1 stands out as a solid, albeit ambitious,
financing in one of the most competitive carriers' markets in the
world.
Atlantic-1, the 12,500km cable ring covering the Atlantic linking New York, London and Paris, is a 50:50 joint venture between European backbone carriers GTS and global sub-sea operators FLAG Telecom. $100 million each in equity, $300 million in presales capacity contracts and a $500 million non-recourse facility were expected to make up the financing when Barclays Capital was mandated in January last year.
To bring the bank comfort to a sensible level, the experienced FLAG structuring team, on the back of the successful refinancing of their main cable in 1998, were able to persuade lenders that their presales contracts should be regarded as quasi-equity. Given the roster of big-name carriers on their existing network, their ability to sign up the necessary capacity was unlikely to be in doubt ? indeed the necessary agreements now total $750 million.
The sponsors were then, however, able to double the capacity on the planned cable to 2.4 terabits/second, increasing its ability to respond to ?broadband? data traffic growth immensely. The accompanying price-tag increase of $100 million made it necessary to bring in West LB and Dresdner Kleinwort Benson, also familiar with sub-sea cable deals, as designated joint leads.
All the players agree that these factors combined for a relatively smooth syndication. A one-in-three strike rate and a short closure window, at a time when bank appetite for undertakings of this nature has been relatively muted, shows what a firm structure and proven technology can do in the year that brought us Iridium and Thuraya.
Of course FLAG Atlantic-1 could never be characterised as a stand-alone proposition. FLAG Telecom will fund its portion of the equity through an IPO and GTS will be bringing not only their expertise on the back-haul construction phase, but also their substantial Internet and business network interests in Europe.
Major FLAG shareholder Bell Atlantic has recently announced that it would use FLAG's network as its primary capacity supplier. Bell recently won permission in the US to provide long distance services from its New York base ? it now needs to access the connectivity it needs to provide a seamless service for high-value clients.
Attention will now pass to the Far East, where a similar regional battleground between projects is now being formed. The experience of FLAG suggests that a straightforward structure and a real touch for signing up carriers will give the winning projects a sure-fire edge.
Atlantic-1, the 12,500km cable ring covering the Atlantic linking New York, London and Paris, is a 50:50 joint venture between European backbone carriers GTS and global sub-sea operators FLAG Telecom. $100 million each in equity, $300 million in presales capacity contracts and a $500 million non-recourse facility were expected to make up the financing when Barclays Capital was mandated in January last year.
To bring the bank comfort to a sensible level, the experienced FLAG structuring team, on the back of the successful refinancing of their main cable in 1998, were able to persuade lenders that their presales contracts should be regarded as quasi-equity. Given the roster of big-name carriers on their existing network, their ability to sign up the necessary capacity was unlikely to be in doubt ? indeed the necessary agreements now total $750 million.
The sponsors were then, however, able to double the capacity on the planned cable to 2.4 terabits/second, increasing its ability to respond to ?broadband? data traffic growth immensely. The accompanying price-tag increase of $100 million made it necessary to bring in West LB and Dresdner Kleinwort Benson, also familiar with sub-sea cable deals, as designated joint leads.
All the players agree that these factors combined for a relatively smooth syndication. A one-in-three strike rate and a short closure window, at a time when bank appetite for undertakings of this nature has been relatively muted, shows what a firm structure and proven technology can do in the year that brought us Iridium and Thuraya.
Of course FLAG Atlantic-1 could never be characterised as a stand-alone proposition. FLAG Telecom will fund its portion of the equity through an IPO and GTS will be bringing not only their expertise on the back-haul construction phase, but also their substantial Internet and business network interests in Europe.
Major FLAG shareholder Bell Atlantic has recently announced that it would use FLAG's network as its primary capacity supplier. Bell recently won permission in the US to provide long distance services from its New York base ? it now needs to access the connectivity it needs to provide a seamless service for high-value clients.
Attention will now pass to the Far East, where a similar regional battleground between projects is now being formed. The experience of FLAG suggests that a straightforward structure and a real touch for signing up carriers will give the winning projects a sure-fire edge.
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