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Intelsat extends merger plan; SoftBank exasperated

Japanese media giant SoftBank has helped Intelsat sweeten its proposed debt-swap by a small amount in its drive to merge with Jersey-based OneWeb. SoftBank will put in a minuscule extra $61.6 million, which might sound a lot, but doesn’t add up to much when the total pitched by SoftBank now on the table is $1.79 billion.

Intelsat has also extended the time-table for acceptances to the debt restructuring from today (May 18th) to May 31st.  As of May 17th less that 1 per cent of the existing debt-holders had accepted the terms then on offer.  The new offer on the table from Intelsat needs to hit a 85 per cent acceptance for the new terms to kick in.

But SoftBank is clearly getting to the end of its tether, and says it has held discussions with other potential merger partners.

Intelsat’s debt holders can now swap 66 ‘old’ shares into 69.474 shares in the merged entity. Also changed is the overall total reduction of Intelsat’s debt, from some $3.6 billion to about $2.85 billion.

SoftBank’s statement was blunt, suggesting that time was truly running out for those debt-holders holding out for more cash. “We have been crystal clear to the bondholders that we are at the absolute limit of what we are prepared to pay for this, and unwilling to negotiate any further,” Alok Sama, Softbank Group International’s president and CFO, in a statement to Bloomberg.

Indeed, his statement carried an implied threat to debt-holders. Saying that the Japanese group had been approached and had been in discussion with others potential merger partners over the past few months, and had signed NDA’s with some of these players. SoftBank added – just as bluntly – that it had a very clear idea as to the true value of Intelsat when compared and contrasted with other discussions it had held.

The prize in SoftBank’s hands in Jersey-based OneWeb, which is building a super-constellation of Low Earth Orbiting satellites to supply broadband connectivity over the planet.

And importantly, SoftBank’s initial ‘lock-in’ to deal exclusively with Intelsat is now over and it is free to talk to other players and the prize is OneWeb’s participation in the end result.

The question now is – without doubt – who else in the satellite industry might SoftBank have been in discussion with? Could it be Canada’s Telesat, which has been looking for a sale or expansion for some years, or might it be Paris-based Eutelsat? Could Charlie Ergen’s Echostar be up for a merger? Each of these would create headaches, but any such problems might be easier to overcome than the current Intelsat impasse.

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