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. 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 SA, and Inmarsat Plc, as well as infrastructure funds, Jeffrey Tan, an analyst at OSK Holdings Bhd., 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.

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