Aurelius Capital questions Intelsat debt plans
July 11, 2016
By Chris Forrester
Aurelius Capital Management is a small hedge fund investor in Intelsat, but has managed to become a financial thorn in the satellite giant’s side.
Aurelius is alleging that Intelsat has used the same assets to secure two separate sets of debt. According to Bloomberg News, Aurelius’s managing director, David Tiomkin, sent a letter July 7th to Intelsat’s CFO Jacques Kerrest and stating that Intelsat has recently pledged assets as collateral for a $1.25 billion (€1.13bn) loan. Tiomken alleges that the same assets were used to help secure a $815.3 million loan in May.
Intelsat is firmly denying the allegation, saying: “Aurelius has made a series of baseless claims against our company, and the most recent letter is more of the same. No other creditors have joined in the letter or its false allegations.”
Aurelius is alleging that such use of tIntelsat’s assets is “highly suspect under US state laws dealing with fraudulent transfers… [and] that the Intelsat subsidiary (Intelsat Jackson Holdings) “had no obligation to provide those guarantees”.
Aurelius is further alleging that Intelsat defaulted by breaching one of its loan obligations in May, by taking on new debt to fund a $360 million dividend payment.
Bloomberg says that Intelsat’s $2.2 billion 7.25 per cent bond due to mature in October 2020 is trading at 69 cents on the dollar, and has lost more than 18 cents/dollar this year.