Intelsat gets Fitch Ratings upgrade
May 7, 2024
By Chris Forrester
Fitch Ratings has given Intelsat SA (and sister company Intelsat Jackson Holdings) a ‘Rating Watch Positive’ (RWP) and ‘Credit Positive’ overview and helped by the incoming buyer SES and its stronger financial and credit profile.
The RWP reflects Fitch’s expectations that SES SA’s acquisition of Intelsat, announced on April 30th, will be a credit positive, given SES’s (BBB/Stable) stronger financial and credit profile. The total enterprise value (EV) of the transaction is reported at approximately $5 billion (€4.65bn) and the transaction is expected to close in the second half of 2025, following regulatory and other customary approvals.
Fitch says SES will acquire 100 per cent of Intelsat’s equity for a cash consideration of $3.1 billion and certain contingent value rights (total EV of $5 billion). The transaction will be financed from existing cash and equivalents and the issuance of new debt, including hybrid bonds.
“The combination of SES and Intelsat will create a leading global satellite operator with strong scale and a multi-orbit, multi-band constellation that will better position the businesses to meet future competitive threats. The combination will also improve geographic diversification with a more balanced portfolio spread, spanning North America (about 47 per cent of proforma revenues), Europe (28%) and other markets (APAC, MEA and LatAm: 25 per cent),” adds Fitch.
Fitch says that Intelsat standalone has experienced secular pressure on certain revenue streams, particularly the media and network business. Government business has been relatively stable. Fitch expects the mobility business, particularly commercial aviation, to be a significant driver of growth, potentially offsetting pressures in other areas of the business. The company posted two years of organic revenue growth in 2022 and 2023.
“Intelsat’s rating reflects the company’s leading scale and geographic reach, as well as capital-intensive business model. There are significant barriers to entry due to the limited number of orbital slots and the material costs associated with constructing and launching a satellite fleet. The mobility line of business is an avenue for growth, and the government business is stable with high rates of renewal. The media and network businesses are exposed to secular pressures,” says Fitch’s report.
“SES’s standalone rating (before the Intelsat purchase) reflects a mixed credit profile with some infrastructure qualities. This reflects reasonably good revenue visibility based on long contract durations in the direct-to-home (DTH) video segment, a cash-generative business model and barriers to entry from regulated orbital positions,” adds Fitch.