Intelsat not for sale
January 11, 2016
Last week Intelsat again suffered a bad time in terms of its share price. A Christmas holiday rally (from December 17th to December 24th its ordinary share price rose dramatically from $3.69 to $4.47) but that buoyancy was lost last week when it plummeted from $4.20 on January 4th to just $3.53 by close of trading on January.
January 8th also saw Intelsat confirm that its preferential shareholders (not applicable to common stock-holders) would receive 71.8 US cents/share in a dividend pay-out.
However, last week also saw a major research report to investors from equity analysts at Berenberg Bank. One of the topics covered was an examination as to whether Europe’s two giant satellite operators Eutelsat or SES might be interested in picking up any of Intelsat’s assets.
The report reminds investors that this ‘Intelsat for sale’ report was prompted by a September 2015 story in the normally wholly reliable Financial Times which stated that “Intelsat was exploring a sale of some strategic assets” in order to reduce its $14 billion net debt position.
Berenberg’s report looks in detail at the substance behind the news story, and how much of it might be considered a possibility. In summary, Berenberg suggests that any sort of asset sale is unlikely unless given extraordinary compensation in terms of asset value. In fact any sale currently would likely only attract a distressed valuation, says the bank.
“It may be an understatement to suggest that Intelsat has not had the best couple of years, both in terms of operations and share price performance. However, in our view, things are far from desperate. While we do not take a view on Intelsat’s share price valuation, it appears that from a cash flow and debt maturity point of view the company is not yet a distressed seller, at least on consensus estimates. More likely, in our view, will be that it pursues a capital reorganisation (debt for equity swap),” states the bank.