The Aireon global flight-tracking service, in which Iridium Communications is a large minority shareholder, owes Iridium $200 million in return for having Aireon ADS-B payloads aboard the Iridium Next satellite constellation. Aireon has been unable to make the payment. As a consequence, Iridium is negotiating an amendment to its $1.8-billion credit facility, delaying payments to satellite prime contractor Thales Alenia Space and suspending dividend payments on its preferred stock. Iridium says the modifications mean the company has until early 2019 before it will need the Aireon cash. Credit: Aireon
Key takeaways from Iridium’s 4th quarter financial results:
— Co. says SpaceX has promised that the unexpected five-month gap, to June, between the first and second Iridium Next launches won’t be repeated as the rocket builder builds a supply of vehicles.
— Iridium paid SpaceX $67.9 million for an eighth launch, to occur in mid-2018, of a final five Iridium Next spacecraft. Two NASA-German science satellite passengers sharing the launch will finance $31.8 million of it.
— Kosmotras of Russia still doesn’t have Russian Defense Ministry approval to launch two Iridium satellites on the Russian-Ukrainian Dnepr rocket, for which Iridium has already paid $36.8 million — money that may never be repaid.
— Iridium is close to an agreement with satellite prime contractor Thales Alenia Space to delay some $500 million in payments due in 2017 and 2018 to preserve cash, and with its lenders to relax debt-service cash reserve requirements, to compensate for late-arriving cash from partner Aireon, a start-up aircraft tracking service.
PARIS — Mobile satellite services provider Iridium Communications on Feb. 23 said the first of the 10 second-generation satellites launched in January had been placed into service, filling one of two “holes” in the global network.
The second hole will be filed by one of the 10 satellites on the next launch, scheduled for June, which “will bring us back to full strength” in terms of coverage, Iridium Chief Executive Matt Desch said in a conference call with investors.
Eight of the 10 Iridium Next satellites launched in January will be in their respective operating locations by mid-April, each of them swapping places with a first-generation satellite. The older satellites will be removed from service and placed at a lower altitude for eventual de-orbiting.
Here’s a video from Iridium about the satellite swap process:
The remaining two satellites are being drifted into an adjacent orbital plane — Iridium’s constellation has six plaines, each with 11 operating satellites — and should be in service by the end of 2017, Desch said.
Start-up aircraft tracking service Aireon, which is the principal fee-paying hosted payload on board the Iridium satellites, was expected to take control of the payload before the end of February and had already begun tracking, on a test basis, thousands of aircraft with Aireon’s ADS-B, or Automatic Dependent Surveillance-Broadcast, service.
Harris-exactEarth AIS testing starts in March after antenna deployment
Another hosted-payload customer, Harris Corp., who with exactEarth of Canada has a ship-tracking payload on board four of the first 10 satellites, is expected to deploy its VHF antenna from the aft side of the Iridium spacecraft in March to begin testing.
“The testing and deployment of the satellites from Launch 1 is going about as well as anyone could have imagined,” Desch said.
Iridium has hired SpaceX to conduct seven 10-satellite launches of the Iridium Next constellation. In November, Iridium purchased an eighth launch, to occur in mid-2018, to carry five Iridium satellites and two scientific satellites for Germany and NASA.
In a Feb. 23 filing with the U.S. Securities and Exchange Commission (SEC), Iridium said it paid $67.9 million for the launch. A NASA-German payload of two science satellites will share the launch and finance $31.8 million of the cost, Iridium said.
SpaceX’s crowded manifest – 6 from Florida before Iridium at Vandenberg
The second SpaceX launch was supposed to occur in April, but SpaceX told Iridium it did not have enough rockets available to keep that date given the company’s full manifest of customers. A mid-June launch is now planned, which means Iridium will wait an additional two months before filling the second of two holes in its coverage.
One industry official said SpaceX was juggling a long list of customers who are anxious to launch, and that the company has planned six campaigns from its Florida spaceport before proceeding with the Iridium launch from Vandenberg Air Force Base, California.
Upcoming launches include the EchoStar 23 commercial telecommunications satellite, a SpaceX Dragon supply freighter supplying the International Space Station under a NASA contract, the SES-10 commercial telecommunications satellite, to be the first launch using a previously used Falcon 9 first stage, the Intelsat 35e commercial telecommunications satellite, and the U.S. National Reconnaissance Office’s NROL-76.
An NRO spokeswoman on Feb. 16 said the satellite’s launch date had yet to be determined.
With its second-generation satellites now coming off the Thales Alenia Space-Orbital ATK production line in Arizona at a rate of one a week, and the SpaceX launch manifest beyond its control, Iridium is now focused on financial issues.
Credit facility amendment imminent to relieve near-term pressure
Iridium Chief Financial Officer Thomas J. Fitzpatrick said that in February the company has fully drawn on its principal credit facility, from the French export-credit agency, Coface, in the amount of $1.8 billion, to cover most of the cost of the Thales Alenia Space satellite manufacturing contract, valued at $2.3 billion.
From now on, Iridium will be paying its bills uniquely from its own cash on hand.
Because the Aireon commercial flight tracking service has not yet secured sufficient financing to pay its Iridium hosted-payload bill, Iridium has negotiated a delay in payments to Thales Alenia Space and delayed payment into a debt service repayment account, which had been required by the Coface-led lender group.
Under the amendment, the mandated level of $189 million to be kept in that account would be reduced by about $80 million but would need to be deposited by early 2019.
Iridium will also suspend payments of dividends on its preferred stock.
Aireon has agreed to pay Iridium $200 million to place the Aireon ADS-B flight-tracking payloads on all the Iridium Next satellites.
Fitzpatrick said he was optimistic that Aireon would be able to monetize the commitments it has received from several Air Navigation Service Providers (ANSPs), but that this would not happen immediately. Aireon is especially focused on securing the U.S. ANSP, the Federal Aviation Administration, as a customer.
Iridium had paid Thales Alenia Space $1.75 billion as of Dec. 31, leaving slightly more than $500 million remaining, which was to have been paid in 2017 and 2018.
With the Coface-led loan now fully drawn, Iridium is now funding operations from cash on hand and is scheduled to begin loan repayments by next September.
The agreement with Thales Alenia Space and the creditors “provides the cushion we need to absorb an Aireon delay of payments well into 2018,” Fitzpatrick said. “We will need to have collected the Aireon hosting fee by the end of the first quarter of 2019, or made other arrangements, to repay Thales and fund the [debt service repayment account] at that time.”