Posted Apr 01, 2012 09:40 am CDT
If you thought rocket science was daunting, try figuring out a way to protect investors’ stakes in satellites, which can sometimes explode upon launch or fail in orbit.
Peter Nesgos, a partner at Milbank, Tweed, Hadley & McCloy in New York City, is confident he has come up with a more affordable means to mitigate the risk associated with investing in satellite technology: a patent.
More specifically, Nesgos has devised a business method patent that doesn’t require financial backers to insure the full value of the equipment, which can run upwards of $500 million per satellite. Nesgos describes the patent as a hybrid of pure satellite property insurance and a financial product akin to that used to manage risk on stocks and other securities.
“This is intended to help the companies that are just either starting up or have a small number of satellites,” Nesgos says. “Those companies do have a tendency to have a harder time raising capital.”
Smaller satellite companies sometimes operate only a limited number of satellites, so if even just one fails, it can represent a big hit to revenue, says Nesgos, whose patent was issued in November. The satellites have a wide range of uses, from providing television service to millions of consumers to collecting data for Google maps.
“It’s really a business method patent to manage the risk to the value of a satellite company’s shares or bonds,” he says. “It’s geared more toward the value of investment rather than the actual value of the asset.”
Nesgos, who will use the patent to structure a new class of protection in cooperation with insurance providers, says the premium paid for this form of coverage will be considerably lower than if an investor were to insure the full value of the equipment.
“What I’m really looking to do is find ways of getting satellite deals to happen,” he says.