AST supports space network buildout with US$1bn 10-year CB
AST SpaceMobile secured US$1bn late Wednesday from the sale of a 10-year convertible bond, the latest step in an aggressive balance-sheet overhaul that has sharply reduced the company's debt while extending maturities and supporting its transition to commercial operations.
UBS, Barclays and Bank of America priced the new CB on an overnight basis at a 2.25% coupon and 20% conversion premium, in line with fixed price talk and after having wall-crossed investors with details of the financing.
ICR Capital acted as independent adviser.
The space-based telecom provider used the proceeds from the new deal to repurchase US$46.5m and US$250m principal of 4.25% and 2.375% CBs that are convertible at US$26.99 and US$72.07, paying a premium for their early takeout and forcing it to undertake an intermediary step.
AST shares closed Wednesday's session ahead of pricing at US$96.92. The 4.25s and 2.375s traded at 381% and 164% of par.
“We had to figure out a way to provide the existing holders with clean stock,” said one banker. “That is what the registered direct offering accomplishes. It is a two-step process.”
UBS was placement agent on a registered direct offering of 6.4m shares priced at US$96.92 and sold to holders of the 4.25s and 2.375s – those holders received cash for the full amount of the repurchase and used the excess above par to purchase clean stock that can be sold without restrictions.
The outcome is equivalent to net-share settle – par in cash and excess in stock – typically used to settle CBs at maturity or on their early takeout. In this case that was not possible because the bonds purchased were so recently issued – AST issued the 4.25s in January last year and the 2.375s in July.
“Because of securities laws and (the fact that) the converts repurchased were not seasoned, the company could not deliver treasury shares,” explained the banker.
The net result is that there was a lot of new stock for sale after the pricing. AST shares tumbled 15.2% post-pricing Thursday to US$82.22 as CB arbs cashed in their windfall.
“Part of the pressure is from arbs selling stock they purchased, and part is from delta-hedging of the new CB,” said a second banker.
Four trips
AST has been active in the CB market, beginning with US$460m of the 4.25s issued in January last year and US$575m of the 2.375s in July. The company also priced a US$1.15bn 2% CB in October that matures in January 2036 and now that latest deal, which matures in April 2036. Those first two bonds have been trimmed to US$3.5m and US$325m, with their takeouts funded with lower-cost, longer-dated CBs in combination with a registered direct stock sale.
Another way to think about all of this is that equity is being sold in the form of a convertible debt.
AST said it issued 1.15m incremental shares to the shares underlying the existing notes that are being repurchased, removed US$300m of debt from its balance sheet and eliminated US$51.4m of remaining interest expenses.
The Texas-based company has used the CB market to help fund it plans for as many as 60 satelitte launches this year that are aimed at supporting consumer mobile networks around the world.
On Tuesday, the company deployed its BlueBird 6 low-earth orbit satellite that spans 2,400 square feet and supports peak data speeds of up to 120 Mbps. Another launch planned for late February allows for the deployment of up to eight satellites.
AT&T is among the customers that have planned to offer beta services in partnership with AST as early as the first half of 2026.
At 50 satellites, AST should be able to provide coverage over key markets, including the US, Canada, the UK, Japan and Saudi Arabia. One hundred satellites will allow for global communications.
This, of course, takes a lot of money. AST is projected to burn through US$116.3m of Ebitda this year, before making US$370m in 2027 and US$1.4bn in 2028, according to LSEG data and consensus analyst estimates.
After having now priced four CB offerings since the beginning of 2025, AST may be done funding for the time being. Though with deep-pocketed competitors such as SpaceX on the public markets horizon, one can never be sure.