Intelsat considering Chapter 11?

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Later today (at 12pm EST) the FCC will issue its comments on proposals by the C-Band Alliance (CBA) as to the reallocation of satellite spectrum over the US.

Bloomberg News is reporting that if the FCC’s decision is not favourable to the CBA, then Intelsat might enter Chapter 11 bankruptcy, and had instructed law practice Kirkland & Ellis to advise it. The unconfirmed report is reasonable in that Intelsat’s management would be derelict were they not to consider all their options in the fall-out of a negative decision.

One impact, however, of a Chapter 11 move would be that the whole FCC-organised scheme would be extended by years. The CBA is on record as saying that without fair compensation, their spectrum would not be made available for 10 years.

In a note to clients, investment bank Exane/BNPP said there were some key points to watch for in regard to the incentive terms and in particular over and above a $5 billion base threshold:

  • Anything above $10-12 billion is likely to have Intelsat and SES share prices rally strongly towards last September levels.
  • Anything between $6-10 billion is likely to have SES respond strongly and trigger a positive but more subdued reaction to Intelsat as it would not dispel risk of bankruptcy.

The report adds: “The second key point to watch is the breakdown of proceeds between satellite operators. We assume 40 per cent for SES and Intelsat and 10 per cent for Eutelsat. Telesat and SSOs getting the rest.”

“Other elements to watch include the level and structure of the clearing cost reimbursement, the tax implication of the incentive payment (we assume 21 per cent for SES, 25 per cent for Eutelsat and 0 per cent for Intelsat), whether the CBA is appointed as clearing coordinator, who is appointed as transition facilitator, the timing of the incentive payment (we assume 10 percent in December 2020, 15 per cent in June 2022, 75 per cent in December 2023).”


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