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Operator:
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Good
afternoon. My name is LaTanya and I will be your conference
operator today. At this time, I would like to welcome everyone
to GHL Acquisition Corporation Investor
call.
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All
lines have been placed on mute to prevent any background
noise. After the speaker’s remarks, there will be a
question-and-answer session. If you would like to ask, a
question during this time simply press star then the number one on your
telephone keypad.
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If
you would like to withdraw your question, press the pound
key. I will now hand the call over to Mr. James Babski of GHL
Acquisition Corporation. Thank you. Mr. Babski
please go ahead.
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James
Babski:
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Thank
you, operator. I’d like to read the Safe Harbor Statement
before I turn the call over to Scott Bok, CEO of GHL Acquisition
Corporation to summarize today’s
announcement.
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This
conference call could contain forward-looking statements about GHL
Acquisition Corporation or Iridium Satellite LLC within the meaning of the
Private Securities Litigation Reform Act of
1995.
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Forward-looking
statements are statements that are not historical fact. Such
forward-looking statements are based upon the current belief and
expectations of the management of GHL Acquisition Corporation and/or
Iridium Satellite LLC and are subject to risks and uncertainties, which
could cause actual results to differ from the forward-looking
statements.
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Such
risks are more fully disclosed in GHL Acquisition Corporation’s filings
with the Securities and Exchange Commission. The information
set forth here in should be considered in light of such
risks.
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Neither
GHL Acquisition Corporation nor Iridium Satellite LLC assumes any
obligation to update the information contained in this conference
call. In a few moments, I’ll turn the call over to Scott Bok
who will discuss today’s
announcement.
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After
Mr. Bok has completed his comments, we will take your
questions. I’ll now turn it over to
Scott.
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Scott
Bok:
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Thank
you, James and thank you all for joining. I think this will be
a brief call but I did think it was worthwhile to just touch base briefly
on this morning’s announcement and also put that in the context of what
else we’ve done in terms of steps taken toward a merger
vote.
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The
first thing really to highlight, of course, is, you know, we did negotiate
a transaction price reduction that was announced in late
April. That was a 15 percent reduction in the consideration
that is being paid to existing Iridium
holders.
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Since
then the S&P 500 is up 15 percent and Inmarsat is up 13 percent, I
think as of yesterday. It’s up considerably again
today. So we feel very good about that price reduction in the
context of how markets have continued to
rally.
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Secondly,
we announced very recently buying out $3.7 million GHQ warrants held by
Bank of America. That will be a condition on the merger
closing. It will be at $0.50 cash each. I certainly
feel very good about that valuation relative to intrinsic
value.
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Then
we have today’s warrant restructuring and repurchase which meaningfully
reduces the warrant overhang on the shares post closing and also reduces
the pro forma fully diluted EBITDA to
investors.
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If
you look at page six of the brief presentation we filed today which has
the details of the warrant restructuring, which are obviously, also
contained in the press release we put out. You can see that we
in total have dealt with 30.5 million GHQ warrants through either
repurchases or restructurings that represent 69 percent of the 44.1
million warrants that would have been outstanding
otherwise.
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The
repurchases were conducted at a meaningful discount to intrinsic value and
the restructurings significantly raised the strike prices to out-of-money
levels. Of the shares – or warrants rather that were
restructured, there were 14.4 million, the strike price has been increased
to 15 percent above a share offering price from a future offering, a
future GHQ common equity offering, up to a maximum strike price of
$11.50.
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Obviously,
that compares to a $7.00 strike price today. In exchange for
that, the expiration date on those options, those warrants, was extended
by two years to February 20, 2015.
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We
had, you know, 14.4 million that were restructured. We have
12.4 million that were repurchased so it’s, you know, call it a 55 to 45
percent split really. Of the 12.4 million that were
repurchased, they were repurchased for an aggregate of $3.1 million in
cash and 12.4 million in GHQ common
stock.
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Again,
the number of shares will be based on the offering price of a future GHQ
common equity offering and that’s subject to a minimum of one-tenth of a
share per warrant.
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We
highlight also on this page what Greenhill’s, as sponsor, ownership of
Iridium will be post-closing. It does have 4 million GHQ
warrants that had not previously been forfeited which are being
restructured to the out-of-money strike price just like the other ones I
just referred to.
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Then
in addition to that, Greenhill will own 6.9 million GHQ common shares
which it got for founding the company and making the original $8 million
equity investment and then 1.9 million GHQ common shares which it will
receive from the conversion of its $22.9 million convertible note
investment it made in Iridium last
fall.
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If
you turn to the next page, it’s just kind of a update on the pro forma
balance sheet. It continues to be the case that post-closing,
even with full 30 percent maximum case redemptions, which is what we’ve
assumed here.
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The
company will have a strong balance sheet, minimal leverage, significant
unrestricted cash. Then on the page following, we just
highlight the impact of all this on
valuation.
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You
can see that the enterprise value to 2009 estimated EBITDA and that’s
simply is in the midpoint of the full year operational EBITDA guidance
that the company provided on April 28
2009.
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That
multiple is now down to an even five times. We obviously think
for any kind of a company that is quite attractive. For a
company with the growth history that Iridium has had we think that’s very
attractive.
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And
to put that in context you can look at Inmarsat which as I mentioned has
traded up since our price reduction was negotiated. Inmarsat
today our closest peer trades at 9.6 times 2009 estimated
EBITDA.
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You
can compare for yourselves the historic growth rates these companies have
had, and then ,of course, there is the difference that Iridium is the only
truly global system that covers the oceans’ airways and Polar
regions.
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Finally,
just to highlight on the last page, the anticipated
timetable. We expect Iridium to announce its second quarter
results during the week of August 10th. We expect to hold the
GHQ shareholder vote in September. We do not expect any further
amendments to economics or other terms of the agreements beyond those that
were announced today and previously that I’ve highlighted
today.
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And
finally, obviously, all of this is still subject to Federal Communications
Commission approval as well as the GHQ shareholder vote that we anticipate
happening in September.
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So
that really is all there is to say. It’s in a way a fairly
simple message where we think it’s an incredibly positive message what
we’ve been able to accomplish today and with that I’m happy to open it up
for any questions.
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Operator:
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Thank
you. Your first question comes from the line Kent Escalera with
RBC Markets.
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Kent
Escalera:
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Hey
guys. I was just wondering if the warrant restructuring would
be offered to people who didn’t participate at this
point.
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Scott
Bok:
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Anybody
who would be interested in talking about that who holds warrants should
feel free to contact James or myself directly. For various
legal reasons, there is a limit to the manner in which you can conduct
these private one-on-one negotiations but we’re certainly open to anybody
who wants to give us a call or drop an e-mail and we can call
you.
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Kent
Escalera:
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OK. Great,
thanks.
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Scott
Bok:
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Sure.
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Operator:
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Thank
you. At this time, there are no further
questions.
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Scott
Bok:
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OK. Thank
you very much. I think today’s message is pretty
straightforward so I didn’t expect there to be a lot of
questions. We thank you for your continued interest and we look
forward to speaking to you again in August when the company will be
announcing earnings. Thank you very
much. Goodbye.
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Operator:
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Thank
you for participating in today’s GHL Acquisition Corporation Investment
call. You may now
disconnect.
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