The combined construction/bridging loan and long-term debt for the Thaicom 6 satellite financing pushed the risk boundary for Thai banks – with lead arranger Kasikornbank (KBank) being the first Thai financial institution to provide a domestic banking solution for a satellite financing.

Thaicom is the sole satellite operator in Thailand and holds that 30-year concession until 2021. The sponsor has launched five satellites – Thaicom 1-5, with 1-3 deorbited and 4 and 5 still in operation.

The Thaicom 6 project is an 18 C-band transponder and 8 KU-band satellite designed to meeting growing demand in both Asia and Africa. From a technology standpoint the project benefits from strong EPCs. Orbital Sciences Corporation, a company with 29 years of experience in construction of around 1,000 satellites, is manufacturing the satellite, while FALCON 9 Space Exploration Technologies, whose customers include NASA, will be launcher.

Thaicom 6 is due to go into orbit in 2013, break even within four years and have a lifespan of at least 15 years. Thaicom is pre-selling capacity with two transponders sold. Another eight transponders need to be secured before it reaches the target break-even level.

Thaicom has traditionally used ECA-backed finance for its projects. The deal for the Thaicom 6 procurement was expected to be no different and feature US Exim support.

Initially KBank provided a $48 million bridging loan during the early phase of the project while Thaicom looked for a long-term ECA-backed deal. But as liquidity and cost of funds in the US dollar market tightened, a long-term domestic funding solution started to look the better option, particularly given the strict two-year timeline for the project and the fact the Thaicom only had 10 years left on its concession.

Given the sponsor was unlikely to get more than 10-year debt without a definite extension of its concession beyond 2021, the added long tenor attraction of an internationally banked deal lost its gleam.

The final long-term deal is a $136 million 10-year corporate loan based on a 80/20 debt-to-equity ratio. The tenor reflects the remainder of Thaicom’s concession period, which despite experience of both the telecoms and aerospace markets, KBank still had to get comfortable with and required significant regulatory due diligence by legal counsel Hunton & Williams.

Thaicom 6
Status: Financial close 29 August 2011
Description: First Thai satellite financing by domestic bank market
Sponsor: Thaicom
Sole MLA: Kasikornbank
Sponsor counsel: Linklaters
Lender counsel: Hunton & Williams