AST supports space network buildout with US$1bn 10-year CB
AST SpaceMobile secured US$1bn on Wednesday from the sale of a 10-year convertible bond in the latest step in an aggressive balance sheet overhaul that has sharply reduced the company's debt and extended maturities as it transitions to commercial operations.
UBS, Barclays and Bank of America offered the CB with fixed terms of a 2.25% coupon and 20% conversion premium after a wall-crossing exercise. Proceeds could rise via a US$150m greenshoe. ICR Capital was an independent adviser.
The space-based telecoms provider separately repurchased US$46.5m of its 4.25% paper and US$250m of its 2.375% CBs that both mature in 2032. The bonds were only issued last year – in January and July – but are well in the money with conversion prices of US$26.99 and US$72.07.
AST shares closed Wednesday's session ahead of pricing at US$96.92 when the 4.25% and 2.375% notes traded at 381% and 164% of par, respectively.
Typically, companies settle converts by delivering a mix of cash (principal) and stock (any excess) – known as net-share settlement – or in certain cases entirely in stock. In this case that was not possible because the bonds purchased were so recently issued and therefore not seasoned. A registered direct offering to bond holders solved the problem.
“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 RDO of 6.4m shares priced at US$96.92 and delivered to holders of the two notes. The entire US$620.3m repurchase of CBs was covered by the issue of new shares to bondholders.
“Because of securities laws and [the fact that] the converts repurchased were not seasoned, the company could not deliver treasury shares,” said the banker.
The downside is that there was a lot of new stock for sale after pricing. AST shares tumbled 15.2% on Thursday to US$82.22 as CB holders cashed in their windfall.
“Part of the pressure is from arbs selling stock … 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 raised in January last year and US$575m in July. The company also priced a US$1.15bn 2% CB in October that matures in January 2036.
The first two CBs have been trimmed to US$3.5m and US$325m.
AST said it issued 1.15m shares in addition to those underlying the paper that was 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 plans for as many as 60 satellite 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 with a footprint of 2,400 square feet and which supports peak data speeds of up to 120Mbps. Another launch planned for late February allows for the deployment of up to eight satellites.
AT&T is among its 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, and 100 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.
Having priced four CB offerings since the beginning of 2025, AST may be done with funding for the time being. Though with deep-pocketed competitors such as SpaceX on the public market horizon, one can never be sure.