Mubadala raises $1.2bn for satellite project

Mubadala has raised $1.2bn in debt to pay for the UAE's first communications satellites, scheduled for launch in 2010.

Mubadala, the Abu Dhabi Government investment company, has raised US$1.2 billion (Dh4.4bn) in debt to pay for the UAE's first communications satellites, which are being built in Europe with a schedule to launch from Kazakhstan in 2010. The satellites will be used for military and commercial purposes, and managed by a new Mubadala company called Al Yah Satellite Communications (YahSat), which was set up last year.

A consortium of regional and international banks raised the finance, consisting of a $1bn loan and $180 million in standby facilities and debt service. "We are very pleased with the extremely positive response to the financing for our wholly owned subsidiary," said Derek Rozycki, the executive director for project and corporate finance at Mubadala. "The deal is not only oversubscribed, but has very competitive pricing and set structuring benchmarks for the region."

As a Government-backed business linked to one of the Gulf's best funded investment groups, YahSat received financing at interest rates most international businesses would struggle to find in today's shaky credit markets. The interest rate for the 14-year loan was 1.1 per cent above Libor, the benchmark British interbank rate. Jassem Mohammed al Zaabi, the chief executive at YahSat, said the successful financing was "testament to the strength of our sponsorship and our strong business model".

The company has already confirmed two major customers: the UAE Armed Forces and Emerging Market Communications (EMC), a company based in the US that specialises in providing communications services in crisis zones and emerging markets. Mr Zaabi has previously said he hoped to begin selling space on the satellites by the end of the year, and that filling the available transmission space would not be a challenge.

Demand for bandwidth on communications satellites covering the Arab world is high, as the number of free-to-air television stations has risen to 400 today from about 100 in 2004. Transmission space is scarce, with satellites managed by the region's two major operators - the regional consortium Arabsat and Egypt's Nilesat - operating at close to full capacity. "A lot of our clients are looking for better coverage in Africa, Central Asia and the Middle East," said Abel Avellan, the president of EMC, after signing the deal with YahSat in March. "YahSat stuck out for us as a company that had the coverage, but also had the right vision for how they wanted to work together with us."

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