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Intelsat: High demand for tender offer

Intelsat is looking to refinance a large slice of its debt by buying in some $625 million (557m) of its bonds at rates below par, and it seems its offer is oversubscribed. Consequently, Intelsat is tightening up its terms and instead of paying between $710-$755 per $1000 of debt, it is trimming the offer and will now pay only between $657.50-$685 per $1000.

That’s the good news. However, the bad news is that Moody’s Investor Services, while maintaining to its ratings advice on Intelsat’s various borrowings – and welcoming the financial restructuring that’s now underway – also suggests that one option for the operator is to sell a portion of its 50-satellite fleet.

Moody’s says that it will wait two months or so while what it describes as “distressed exchange activity” percolates through the system, and suggests that the success of Intelsat’s current financial restructuring could lead to another discounted offer taking place to owners of senior unsubordinated debt paying 6.75 per cent interest and due in 2018.

Moody’s cautioned investors by saying that Intelsat’s debt-to-EBITDA ratio is likely to stay at around 9.1 and with an investment rating of Caa1, and meaning that the company’s borrowings are subject to a very high default risk.

But Moody’s sweetened its tough comments by adding that because Intelsat had cash reserves sufficient to cover “near-term maturities” and also had assets in the shape of satellites and transponders that could be sold off, its “liquidity has been assessed as adequate”.

Guggenheim Securities is advising Intelsat on its overall debt and financial restructuring, and it is well worth mentioning that there is zero talk of asset sales from Intelsat staffers.

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