EU COMMUNICATIONS: SES FV (€500mn WNG 5Y/8Y; Baa3[N]/NR/BBB[N])
SESGFP
IPT given at MS+230-240bps/MS+280-290bps; we see FV around MS+185bps/MS+235bps.
Not much in the way of satellite comps. Using HY comms names for shape (i.e. ILDFP, FIBCOP) would imply FV around Z+180bps and Z+210bps though varying views of LT prospects for the sector mean the market will likely require additional term premium, as implied by IPT levels.
News in recent months has leaned positive; particularly on Intelsat regulatory approvals and further reports of a Eutelsat capital raise (a positive on willingness of governments to support the strategic sector though the SES BS is in a far better position). Execution post-Intelsat against initially high leverage levels and the ongoing competitive threat from LEO services remain key considerations though we haven’t seen much in the way of news on these fronts recently.
General Description
- FY24 revs: €2.2bn o/w Networks 54%, Media 46% (vs.38%/61% in 2019).
- Networks Gov’t (secure/civil/defence), Mobility (air/sea) and Fixed (telco/cloud/enterprise).
- €4.8bn gross backlog (€2.6bn in Networks, €2.2bn in Media).
- Differentiates through multi-orbit solution (i.e. MEO/GEO satellites w/ partnerships for LEO).
- Reported leverage is 1.2x to rise to 3.5x post-deal but fall back to <3x in 12-18 month.
- Fitch see pro-forma leverage at 3.1x against thresholds of 2.3x/1.8x.
- Moody’s see pro-forma leverage at 3.8x in FY25 (vs. 3.5x at FY24) vs. 3.25x/2.75x thresholds.
- Both see potential upside on C-band proceed discretion though we note prior comments that they will “prioritise s/h remuneration when allocating any future exceptional CFs".
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OUTLOOK: Price Signal Summary - Bear Cycle Extension In Gilts
- In the FI space, recent gains in Bund futures undermine a bearish theme and suggest the move down between Apr 22 - May 15, has been a correction. An extension higher would strengthen the reversal and open 130.86 next, the May 9 high. Further out, scope would be seen for a move towards 132.03, the Apr 7 high. Key short-term support has been defined at 129.13, the May 15 low. A break of this level would reinstate the recent bear cycle.
- A bear cycle in Gilt futures remains in play and recent weakness strengthens a bearish theme. 90.92, 76.4% of the Apr 9 - May 2 rally, has been cleared, paving the way for an extension towards 89.99, the Apr 9 low and the next key support. Resistance to watch is 92.30, the 20-day EMA.
US DATA: Mortgage Rates Again Spared Full Extent Of Swap Rate Increase
MBA mortgage applications fell 5.1% (sa) last week as mortgage rates increased for a second week although were again spared a sharper increase as mortgage rate to swap spreads narrowed again.
- MBA composite mortgage applications fell 5.1% (sa) last week after a 1.1% increase the week prior. They stand at ~50% of 2019 levels.
- Both new purchases and refis saw similar sized declines, with new purchases at -5.2% after 2.3% (61% of 2019 average) and refis at -5.0% after -0.4% (39% of 2019 average).
- The 30Y conforming rate increased 6bp after a 2bp increase the previous week, with 6.92% the highest since mid-Feb.
- However, mortgage lenders again didn’t fully pass through higher swap rates over this period, with the average 10Y swap rate over the week some 16bp higher after an 11bp increase the previous week.
- It sees the mortgage rate to 10Y swap spread at 296bp for a 19bp tightening from the 315bp in early May that had been its widest since Feb 2024.
US TSY FUTURES: BLOCK: Jun'25 10Y Ultra Sale
- -3,300 UXYM5 111-18, sale through 111-18.5 post time bid at 0702:00ET, DV01 $292,000.
- the 10Y ultra contract trades 111-19 last (-16.5)
