It looks like they’ve struck some kind of an agreement after all as SkyTerra Communications, Inc. (SkyTerra) and Mobile Satellite Ventures LP (MSV) announced that the Harbinger Capital Partners Funds (Harbinger) has agreed to provide $500 million of debt financing to fund SkyTerra’s business plan through the third quarter of 2010. In addition, SkyTerra and MSV have entered into a Master Contribution and Support Agreement (the “Master Agreement”) with affiliates of Harbinger with respect to the possible combination of SkyTerra and Inmarsat plc, a UK public listed company, and a leading provider of global mobile satellite communications services. Inmarsat is not a party to the Master Agreement.
SkyTerra, MSV, and MSV Finance Co. entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with affiliates of Harbinger, pursuant to which MSV and MSV Finance Co. will issue to Harbinger up to $500,000,000 aggregate principal amount of 16.0 percent Senior Unsecured Notes due July 1, 2013 (the “Notes”) in four tranches, with the first tranche available on January 6, 2009. In conjunction with the issuance of Notes pursuant to the Securities Purchase Agreement, SkyTerra will issue to Harbinger warrants to purchase up to an aggregate of 25,000,000 shares of common stock of SkyTerra at an exercise price of $0.01 per share of common stock. The financing is not conditioned upon the commencement or consummation of a business combination with Inmarsat.
The Master Agreement provides for the possible combination of SkyTerra and Inmarsat, subject to the receipt of required regulatory and antitrust clearances. SkyTerra and Harbinger expect the regulatory approval process, which includes approval from the U.S. Federal Communications Commission, other telecommunications approvals, and antitrust clearances to take approximately 12 to 18 months. Assuming receipt of satisfactory regulatory and antitrust approvals, the proposed business combination with Inmarsat would be structured as an offer by SkyTerra to acquire all of the issued, and to be issued, shares of Inmarsat not owned by Harbinger (the “Offer”), on terms to be determined by Harbinger and in accordance with the Master Agreement. As a result of the timing of the regulatory approvals, it is not the intention of SkyTerra and Harbinger to announce the formal terms or structure of a possible Offer at this stage.
If Harbinger decides to proceed with the Offer following the receipt of required regulatory approvals, Harbinger will arrange for committed equity and debt financing to fund the Offer. SkyTerra would undertake to use its best efforts to assist Harbinger in obtaining debt financing. To provide equity financing for the Offer, Harbinger may purchase newly issued shares of SkyTerra voting common stock for $2.4 billion in cash or such other amount as Harbinger may determine. The per share purchase price for the newly issued shares will be $10.00 per share subject to an adjustment ratchet relating to the successful Offer price paid for each Inmarsat share. If the Offer price for each Inmarsat share is greater or lower than 535p then the purchase price for the newly issued SkyTerra shares will increase or decrease proportionately (adjustment ratchet). The 535p per share and $10.00 per share prices are reference prices for the purposes of the Master Agreement and the arrangements between Harbinger and SkyTerra. The 535p per share does not constitute a term or reference price for the Offer. No Offer pricing discussion has taken place with the board of Inmarsat and no determination has been made by SkyTerra or Harbinger as to any appropriate Offer price. SkyTerra shareholders other than Harbinger may participate in the equity financing for the Offer through a rights offering of voting common stock up to $100 million.
