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Telecom Satellites: Bank Financing and Insurance Requirements Euro-Asian Space Week Singapore 26 November 1998 26 November...
Telecom Satellites: Bank Financing and Insurance Requirements – Main points <ul><li>Satellite Project Financing – Key Feat...
I – Key Features of Satellite Project Financing <ul><li>Future cash flows will repay the debt </li></ul><ul><li>Drawing pe...
Key Features – Main Security Package <ul><li>Before completion: strong guarantee </li></ul><ul><li>After completion: </li>...
Key Features – Market risk assessment <ul><li>Detailed market surveys are a prerequisite </li></ul><ul><li>Commitments of ...
Key Features – A strong partnership <ul><li>Sponsors </li></ul><ul><li>Distributors </li></ul><ul><li>Suppliers </li></ul>...
Key Features – Main issues / risk sharing <ul><li>Risk sharing </li></ul><ul><li>Advanced testing and pre-operating phase ...
II – Banks requirements in terms of Insurance coverage <ul><li>Launch and initial in orbit insurance </li></ul><ul><ul><li...
Insurance coverage <ul><li>Concept of continuous coverage </li></ul><ul><li>Importance of the partial failure definition f...
Insurance coverage – Specific Clauses <ul><li>The Requirement for Specific Clauses </li></ul><ul><li>” Cut-through&quot; c...
Insurance coverage – Banks as &quot;Loss Payees&quot; <ul><li>No reason to make the payment flows more complicated </li></...
Insurance coverage – Important Matters <ul><li>Importance of banks - insurers communication </li></ul><ul><li>Importance o...
III – Recent Evolution in Telecom Satellite Financing <ul><li>Revolution in the satellite industry – new players </li></ul...
Recent Evolution – Impact on Telecom Satellite Financing <ul><li>In the past, the availability of financing was hardly a p...
Recent Evolution – End of the “Education Cycle” <ul><li>First real non recourse, project finance transactions in satellite...
Recent Evolution - New features <ul><li>Big LEOs entered “external financing” phase of development process </li></ul><ul><...
Recent Evolution – How did banks react until recently? <ul><li>Banks continue to use their traditional and “historical in-...
Recent Evolution – How did banks react ? (2) <ul><li>Banks took time to observe </li></ul><ul><li>Lack of benchmark or rea...
Recent Evolution - Will banks adopt another attitude? <ul><li>Customised approach </li></ul><ul><ul><li>Banks can be const...
IV – Impact of the “Asian Crisis” <ul><li>Impact of jeopardised Asian demand for telecom services? </li></ul><ul><li>Impac...
Impact of the “Asian Crisis” (2) <ul><li>How long will the effects of the crisis last? </li></ul><ul><li>The existence of ...
Telecom Satellite Financing and Insurance - Conclusion <ul><li>Bankers understand what the satellite based telecom industr...
Telecom Satellite Financing and Insurance - Conclusion (2) <ul><li>Banks can be partners to the development of innovative ...
THANK YOU ! Pierre-Philippe Martin Credit Lyonnais [email_address] 26 November 1998 Credit Lyonnais
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Presentation Euro Asian Space Week - 26 November 1998

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Telecom Satellites: Bank Financing and Insurance Requirements. Proceedings of the Euro-Asia Space Week on Cooperation in Space - "Where East & West Finally Meet", 23-27 November 1998, Singapore.

Published in: Economy & Finance

Presentation Euro Asian Space Week - 26 November 1998

  1. 1. Telecom Satellites: Bank Financing and Insurance Requirements Euro-Asian Space Week Singapore 26 November 1998 26 November 1998 Credit Lyonnais
  2. 2. Telecom Satellites: Bank Financing and Insurance Requirements – Main points <ul><li>Satellite Project Financing – Key Features </li></ul><ul><li>Banks requirements in terms of Insurance coverage </li></ul><ul><li>Recent Evolution in Telecom Satellite financing </li></ul><ul><li>Impact of the “Asian Crisis” </li></ul>26 November 1998 Credit Lyonnais
  3. 3. I – Key Features of Satellite Project Financing <ul><li>Future cash flows will repay the debt </li></ul><ul><li>Drawing period: 2 to 3 years before launch </li></ul><ul><li>Repayment period: 5 to 10 years after launch </li></ul><ul><li>Margins </li></ul>26 November 1998 Credit Lyonnais
  4. 4. Key Features – Main Security Package <ul><li>Before completion: strong guarantee </li></ul><ul><li>After completion: </li></ul><ul><ul><li>pledge on all assets </li></ul></ul><ul><ul><li>assignment of insurance proceeds </li></ul></ul><ul><ul><li>assignment of satellite revenues </li></ul></ul>26 November 1998 Credit Lyonnais
  5. 5. Key Features – Market risk assessment <ul><li>Detailed market surveys are a prerequisite </li></ul><ul><li>Commitments of distributors to buy a minimum capacity </li></ul><ul><li>Sensitivities </li></ul><ul><li>No technical risk </li></ul>26 November 1998 Credit Lyonnais
  6. 6. Key Features – A strong partnership <ul><li>Sponsors </li></ul><ul><li>Distributors </li></ul><ul><li>Suppliers </li></ul><ul><li>Insurers </li></ul><ul><li>Banks </li></ul>26 November 1998 Credit Lyonnais
  7. 7. Key Features – Main issues / risk sharing <ul><li>Risk sharing </li></ul><ul><li>Advanced testing and pre-operating phase </li></ul><ul><li>Country risk </li></ul><ul><li>Regulatory issues </li></ul>26 November 1998 Credit Lyonnais
  8. 8. II – Banks requirements in terms of Insurance coverage <ul><li>Launch and initial in orbit insurance </li></ul><ul><ul><li>Maximum duration of the early in orbit cover </li></ul></ul><ul><li>In orbit insurance </li></ul><ul><ul><li>Maximum cover to limit renewal risk </li></ul></ul>26 November 1998 Credit Lyonnais
  9. 9. Insurance coverage <ul><li>Concept of continuous coverage </li></ul><ul><li>Importance of the partial failure definition for the banks </li></ul><ul><li>Coexistence of a free re-flight or similar option with standard insurance </li></ul>26 November 1998 Credit Lyonnais
  10. 10. Insurance coverage – Specific Clauses <ul><li>The Requirement for Specific Clauses </li></ul><ul><li>” Cut-through&quot; clause and protection against country risk and local insurance fronting </li></ul><ul><li>” Breach of warranty” - banks have absolutely no operational interest in a space project </li></ul>26 November 1998 Credit Lyonnais
  11. 11. Insurance coverage – Banks as &quot;Loss Payees&quot; <ul><li>No reason to make the payment flows more complicated </li></ul><ul><li>Importance of the quality of the insurance/reinsurance companies </li></ul><ul><li>Are Salvage Rights always necessary? </li></ul>26 November 1998 Credit Lyonnais
  12. 12. Insurance coverage – Important Matters <ul><li>Importance of banks - insurers communication </li></ul><ul><li>Importance of an insurance adviser </li></ul><ul><li>Importance of insurance matters for Crédit Lyonnais </li></ul>26 November 1998 Credit Lyonnais
  13. 13. III – Recent Evolution in Telecom Satellite Financing <ul><li>Revolution in the satellite industry – new players </li></ul><ul><li>Accelerating diversification – unproven markets </li></ul><ul><li>A critical combination of risks </li></ul>26 November 1998 Credit Lyonnais
  14. 14. Recent Evolution – Impact on Telecom Satellite Financing <ul><li>In the past, the availability of financing was hardly a problem </li></ul><ul><li>Less governmental projects and large corporate, more new ventures, smaller companies </li></ul><ul><li>Dramatic increase in financing needs </li></ul>26 November 1998 Credit Lyonnais
  15. 15. Recent Evolution – End of the “Education Cycle” <ul><li>First real non recourse, project finance transactions in satellite financing … </li></ul><ul><li>Open competition among a certain number of banks around the world </li></ul>26 November 1998 Credit Lyonnais
  16. 16. Recent Evolution - New features <ul><li>Big LEOs entered “external financing” phase of development process </li></ul><ul><li>Sponsors put pressure on banks to get non recourse financing </li></ul><ul><li>Impressive success of new financing tools </li></ul><ul><ul><li>Market / Debt instruments </li></ul></ul><ul><ul><li>Vendor financing </li></ul></ul>26 November 1998 Credit Lyonnais
  17. 17. Recent Evolution – How did banks react until recently? <ul><li>Banks continue to use their traditional and “historical in-house” tools </li></ul><ul><li>Commercial Credits vs High Yield Bonds </li></ul>26 November 1998 Credit Lyonnais
  18. 18. Recent Evolution – How did banks react ? (2) <ul><li>Banks took time to observe </li></ul><ul><li>Lack of benchmark or real life experience </li></ul><ul><li>Critical look at cash flow projections </li></ul>26 November 1998 Credit Lyonnais
  19. 19. Recent Evolution - Will banks adopt another attitude? <ul><li>Customised approach </li></ul><ul><ul><li>Banks can be constructive and innovative </li></ul></ul><ul><ul><li>Banks may take the bets of new global/regional services </li></ul></ul><ul><ul><li>Banks may think that some recourse on shareholders is still necessary </li></ul></ul><ul><li>Supporting vendors in their commercial approach </li></ul>26 November 1998 Credit Lyonnais
  20. 20. IV – Impact of the “Asian Crisis” <ul><li>Impact of jeopardised Asian demand for telecom services? </li></ul><ul><li>Impact of redeployment of international liquidity? </li></ul><ul><li>Worldwide impact? </li></ul>26 November 1998 Credit Lyonnais
  21. 21. Impact of the “Asian Crisis” (2) <ul><li>How long will the effects of the crisis last? </li></ul><ul><li>The existence of a market remains key question </li></ul>26 November 1998 Credit Lyonnais
  22. 22. Telecom Satellite Financing and Insurance - Conclusion <ul><li>Bankers understand what the satellite based telecom industry is going through </li></ul><ul><li>More opportunities but increasing complexity </li></ul><ul><li>More sophisticated risk sharing arrangements </li></ul><ul><li>Insurance coverage must evolve </li></ul>26 November 1998 Credit Lyonnais
  23. 23. Telecom Satellite Financing and Insurance - Conclusion (2) <ul><li>Banks can be partners to the development of innovative solutions </li></ul><ul><li>Banks to accompany the industry “as soon as possible” </li></ul><ul><li>Complementarity with other finance instruments </li></ul><ul><li>Asian Crisis – Temporary loss of appetite? </li></ul>26 November 1998 Credit Lyonnais
  24. 24. THANK YOU ! Pierre-Philippe Martin Credit Lyonnais [email_address] 26 November 1998 Credit Lyonnais

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