Chinese company to raise $200 million to purchase Thuraya
January 13, 2017
PARIS — A Chinese investment holding company is putting together a deal to purchase mobile satellite service provider Thuraya for $200 million in a transaction that faces regulatory and financial hurdles.
China Trends Holdings Ltd., registered in the Cayman Islands, plans to offer 1.56 billion Hong Kong dollars ($201 million) in convertible notes to investors only after having received at least some indication that the regulatory barriers can be surmounted.
Dubai-based Thuraya operates two large Boeing-built L-band satellites in geostationary orbit, launched in 2003 and 2007.
Among the regulatory issues that will need to be negotiated is the U.S. International Traffic in Arms Regulations (ITAR), which bars U.S. companies from many dealings in China as regards to space assets.
Satellite fleet operator Spacecom of Israel, which is negotiating its sale to Chinese investors, has structured the arrangement in such a way that the operational control of the orbital assets remains in Israel and is not transferred to China.
China Trends has been talking with Thuraya about an equity purchase for months. In preparation for a future ownership of the satellite operator, China Trends in late 2016 acquired Skynet Satellite Data Ltd. of Hong Kong for 30 million Hong Kong dollars.
That purchase was tied to an agreement between Skynet and SRT Wireless LLC under which SRT Wireless, a Florida-based provider of satellite equipment that is already a Thuraya partner, named Skynet Satellite as the sole agent in China to manufacture and sell SRT satellite data communications products.
Under the proposed agreement, Skynet would have exclusive rights to sell Thuraya’s dual-mode handsets in China.
It was unclear whether China Trends had secured the financial support needed for its 1.56 billion Hong Kong dollars in secured notes. As a holding company, China Trends listed cash and equivalent assets of less than 180 million Hong Kong dollars, according to a Jan. 10 filing with the Hong Kong Stock Exchange.
The company said that if it failed to raise the necessary cash in convertible notes it would seek alternative means of securing the capital.
Thuraya reported revenue of $140 million in 2015. Its chief executive, Samer Halawi, said 2016 was a poor year, in part because of the drop in revenue from oil and gas rigs. Privately held Thuraya does not publish its financial results.
Halawi said in September that the company’s board had approved, in principle, a large capital raise to transform Thuraya from an exclusively L-band satellite provider into a company with an L-band — and relatively low-bandwidth — focus into one that complemented its L-band offer with Ka- or Ku-band leased from operators of high-throughput satellites.
Thuraya-2, operated from 44 degrees east, is nearing the end of its nominal in-orbit life. Halawi said the company likely would need to order a replacement satellite in 2017 in addition to pursuing its transformation into a mixed L-band/high-throughput satellite bandwidth provider.
Thuraya’s biggest competitor, Inmarsat of London, has likewise been eyeing the Chinese market, but with a focus on Inmarsat’s Global Xpress Ka-band broadband product.
Inmarsat has three of these Ka-band satellites in orbit providing near-global coverage, with a fourth under construction — also from Boeing — whose orbital location has not been decided. An agreement with Chinese partners would argue in favor of placing the fourth Global Xpress satellite over the Asia-Pacific.
Peter B. de Selding