Yahoo Finance Satellite firm Inmarsat piles on extra debt as airlines grounded
Britain's largest satellite operator is piling on debt as its crucial in-flight broadband business suffers alongside grounded airlines.
Private equity-owned Inmarsat, which invested heavily in Wi-Fi for air travellers before the lockdown, has been forced to draw down a $278m (£229m) loan from a $700m (£577m) facility. The loan, arranged with Barclays, comes just months after a buy-out left Inmarsat saddled with debt worth £3bn.
Inmarsat, based in London’s Old Street roundabout, was taken off the stock market last year in a £5bn deal, including debt, by an investor group led by buy-out firms Apax and Warburg Pincus.
A spokesperson for Inmarsat said the loan was a precautionary measure. They added that the group’s major investments remain on track. The company said: “As the world leader in global mobile satellite communications, Inmarsat remains a strong and resilient business and is well positioned to address any challenges that emerge as a result of Covid-19.”
Travel bans and the grounding of fleets around the world are a major blow for the company, whose finances have received a boost from doing business with airlines in recent years.
Huge bets placed on the company by its private equity investors were partly down to the belief that more airlines would offer Wi-Fi on-board, Max Fowinkel, Warburg Pincus managing director, said in an interview last year.
Inmarsat had taken other large hits before the crisis, having faced $76m (£63m) in extra costs from its takeover, as well as a $130m (£107m) reduction in payments from troubled US mobile network Ligado. The company has also burnt through huge amounts of capital in recent years to compete with rivals such as SoftBank-backed OneWeb and satellite group Intelsat, both of which have recently filed for bankruptcy.
Meanwhile products from Inmarsat’s legacy business, including satellite phones, remain under pressure. Inmarsat reported a 12.8pc fall in earnings to $671m (£553m) last year, as revenues dropped 4.7pc to $1.4bn (£1.16bn), according to its latest Companies House filings.
Inmarsat’s new satellites, aimed at providing in-flight Wi-Fi, are scheduled for launch from 2023, while a project to deliver broadband coverage for the Polar regions in partnership with Space Norway is set to kick off in late 2022. Outside the aviation industry, the company’s fleet of satellites also supplies broadband to remote areas, plus communications for ships, planes and the military, including the US Navy and British special forces.
