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Seaborn Networks' Marine Route Surveys are Underway for US-­Brazil Submarine Cable Project

by wireworld on 01/08/2013 - 03:54 am

Tags: Press Releases, Projects

Seaborn Networks plans to assemble a group of lenders for its $400 million Seabras-1 sub-sea fibre-optic cable by the end of this quarter, and close and fund on a debt package by the middle of 2013. Seaborn has retained Jefferies as overall financial adviser and to help it raise equity for the project, and has hired Portland Advisers as project financial adviser. The developer has already produced lender technical, market and insurance due diligence reports, and is approaching development banks and export credit agencies, among other lenders, for debt commitments.


 


 


In October, Seaborn signed a turnkey installation contract with Alcatel-Lucent for the 10,700km cable, which will run from New York to Sao Paulo (10,400km), with a spur to Fortaleza (350km). Given the identity of the contractor, which produces much of its cable equipment in France, and Portland's experience in advising on ECA-supported satellite financings, Coface involvement would be a strong possibility, though the developer has not confirmed the identities of any lenders.


 


 


The financing would be a key test of lenders' ability to support a standalone commercial cable, over a decade after the implosion of several fibre-optic carriers soured many banks on the sector. The recovery of the satellite market, after a similar collapse, and thanks to heavy ECA support, suggests that lenders may be willing to re-evaluate cable credits, provided they benefit from robust levels of contractual support.


 


 


According to Larry Schwartz, Seaborn's chief executive officer, and a former CEO of the parent company for subsea cable services provider Global Marine Systems, the project benefits from conservative traffic growth assumptions and a target market that has not suffered historically from excess capacity. Schwartz says that Seaborn's 32 terabits-per-second cable will be the first subsea-only operator on the US-Brazil route, serving local and international operators and content providers needing capacity in Brazil's growing telecoms market. He adds that there are recent examples of ECA participation in cable financings, though some of the covenant language in satellite deals may influence the Seabras-1 financing.


 


 


Spurring demand for cable capacity in Brazil is a government-funded National Broadband Plan targeting that affordable broadband be accessible to 70% of all households by 2015, as well as increases in smartphone and tablet use. Interest in the country's 4G auction was strong, and according to Schwartz, funding for Brazil's telecoms infrastructure has taken place on the balance sheets of large strategic and industrial corporates.


 


 


Large players such as Level 3, which bought Global Crossing, Telefonica and Oi,dominate the Brazilian market, though new entrants are moving into providing capacity in cities and operating mobile infrastructure.


 


 


Schwartz notes that according to the Brazilian Electrical & Electronics Industry Association operators invested R17 billion ($8.2 billion) in Brazil’s telecoms infrastructure between January and September 2012.


 


 


Equity for Seabras-1 is likely to come from a placement to US-accredited institutional investors. Seaborn has already raised several rounds of initial corporate funding, and its advisers include Ernst & Young (tax), Milbank Tweed Haley & McCloy (project), Wiltshire & Grannis (US regulatory), Choate Hall & Stewart (corporate) and Barbosa Mussnich & Aragao (Brazil).


 


 


The cable is set to enter service in the first quarter of 2015, too late for the 2014 World Cup, but in time for the 2016 Olympics. Schwartz stresses, however, that its customers have longer planning horizons than these two sporting events.