To me, the level of debt is bordering on insanity.” “The cash flow is strong until the economy goes south and the company has no flexibility to meet its debt obligations. “The limit here is definitely being tested,” said Dave Stepherson, senior portfolio manager at Hardesty Capital Management in Baltimore. Intelsat’s revenue rose just 3 percent to $2.6 billion in 2012, and the portion of those revenues that come from new business has fallen since 2009. Intelsat’s growth prospects may also be of concern to investors. Last year, it devoted $1.3 billion, or about half its revenue, to pay down its interest expense. Over the last three years, Intelsat has racked up combined net losses of $1.1 billion, according to a company prospectus.

The company’s hefty debt load has resulted in high interest expense which, in turn, caused a string of net losses. Intelsat carried $15.3 billion in debt after the deal closed. The company’s debt level is slightly higher than it was after its $16.6 billion buyout in 2008, which ranks as the largest takeover of a PE-owned company by another private equity firm, according to Thomson Reuters data. “People in general are being more receptive to deals with risk, but they need to understand that it’s not all about reward, they need to be cautious.” “It’s a sign of the times in the marketplace that you’re seeing deals like this come,” said Matt McCormick, a portfolio manager at Cincinnati-based Bahl & Gaynor Inc. That compares to an average debt to EBITDA multiple of 4 to 5 times for other recent sponsor-backed IPOs like Norwegian Cruise Line Holdings Ltd and Bright Horizons Family Solutions Inc Luxembourg-based Intelsat, which is owned by European private equity firm BC Partners and Menlo Park, California-based Silverlake Partners, carries a debt load of more than $15.9 billion, giving it a leverage multiple of around 7.8 times.

plans to test investors’ tolerance for financial leverage in a proposed $500 million IPO next week, as the satellite operator tries to take advantage of a stock market rebound that has increased the appetite for new offerings. (Reuters) - Intelsat Global Holdings S.A.

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