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failure of the xenon-ion electric propulsion syste

Price of PanAmSat Sale Lowered by $200 Million

DirecTV Group Inc. has agreed to cut the price of PanAmSat Corp. by $200 million following the propulsion failure aboard the Galaxy 10R satellite, DirecTV announced Aug. 12.

Private-equity companies Kohlberg Kravis Roberts & Co. LP (KKR), Carlyle Group and Providence Equity Partners Inc. had agreed to pay DirecTV $3.3 billion for the satellite operator and assume about $750 million in debt. As a result of the satellite failure, KKR and its partners will reduce their payment to DirecTV by $200 million.

The Aug. 3 failure of the xenon-ion electric propulsion system aboard Galaxy 10R means the satellite will have to be replaced about three years earlier than planned. In an Aug. 5 telephone conference, PanAmSat officials said they paid about $200 million for Galaxy 10R, including construction, launch and insurance, but they expect a replacement satellite to cost a little bit less.

The U.S. Federal Communications Commission approved the sale of PanAmSat Aug. 11. Company shareholders were expected to add their approval in an Aug. 13 vote. The deal is expected to close Aug. 20.

"We and our equity sponsor partners continue to be excited about owning PanAmSat and we are pleased with the rapid resolution of these issues," Alexander Navab, a partner at Kohlberg Kravis Roberts, said in a statement.
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