High-Flying IPO in Works for PanAmSat

Barely four months after closing its $4.1 billion purchase of PanAmSat Corp. (search) , an investor group led by Kohlberg Kravis Roberts & Co. (search) is already gearing up to offer shares of the satellite broadcaster to the public.

The New York-based buyout shop, hoping to cash in on a rebounding market for initial public offerings, is preparing to take its newly-acquired portfolio company public, The Post has learned.

KKR, along with its investment partners Carlyle Group (search) and Providence Equity Partners Inc., plans to file registration papers with the Securities and Exchange Commission (search) for the PanAmSat IPO as early as today, sources familiar with the situation said. The offering — which is expected to raise about $1 billion — will likely take place in the next 30 to 60 days, pending regulatory approval.

Merrill Lynch & Co. (MER), Citigroup Inc. (C) and Morgan Stanley (MWD) have been selected to jointly lead the underwriting, sources added.

PanAmSat, the country's third-largest satellite provider, will simultaneously issue about $2 billion in high-yield bonds to refinance some of the company's debt.

Besides paying down debt, the proceeds from the offerings will be used to put tons of cash in the pockets of PanAmSat's current private equity owners, sources noted.

Officials at KKR and PanAmSat either declined to comment or could not be reached.

This isn't the first time KKR, Carlyle and Providence took some money off the table since buying DirecTV Group Inc.'s 81 percent stake in PanAmSat last August for about $3.3 billion, plus $750 million of debt. DirecTV is owned by News Corp., the parent company of The Post.

In September, just one month later, PanAmSat issued $250 million in junk bonds to pay a special dividend to its new owners. The dividend reduced the private equity firms' initial cash outlay in the company to roughly $300 million from $550 million.

The PanAmSat deal underscores how private equity firms have been able to take advantage of highly favorable equity and debt markets to make a fast killing off of their recent investments in high cash-flow companies.

Last week, for example, Warner Music sold $700 million of high-yield bonds to award dividend payments to its private equity owners, Thomas H. Lee Partners, Bain Capital, Providence and CEO Edgar Bronfman Jr.

This offering, coupled with other payouts earlier this year, means the private equity investors have essentially recouped their entire $1.25 billion initial investment, leaving them with little risk and huge upside potential.

Indeed, Warner Music is already laying the groundwork for an initial public offering that could come as soon as this spring, according to sources familiar with the situation.

Similarly, PanAmSat's private equity owners also have been able to capitalize on a white-hot high-yield bond market to pull out cash and now plan to tap a healthy IPO market to take PanAmSat public at a favorable valuation.

After four lean years, the IPO market is finally picking up steam. In the past week, 18 new companies were brought to market, the most in a week since August 2000.

For its part, PanAmSat plans to lure investors to its IPO by selling a high dividend-paying stock, which will offer an attractive yield and tax benefits.

PanAmSat, based in Wilton, CT, leases satellites to television networks that use them to deliver programming to broadcast stations and local cable TV systems. The company, which broadcasts about 2,100 channels worldwide over a network of 24 satellites, also transmits programming for direct-to-home TV services and provides technical support for live broadcasts.