Intelsat bonds crash on Chapter 11 news
April 15, 2020
By Chris Forrester
Intelsat’s bonds, already significantly depressed in value, fell dramatically April 14th as news of a contemplated Chapter 11 restructuring emerged.
Back in October its 8.5 per cent interest bonds were trading at just below their 100 cents on the dollar issue price. On April 11th they fell a further 4.8 per cent in value to just 56.9 cents and at one point were touching 50 cents in value.
JPMorganChase is looking to raise about $750 million in fresh borrowing for Intelsat as the company likely enters Chapter 11 under ‘debtor in possession’ trading. There is also some talk of Intelsat seeking a debt-for-equity swap with its creditors. The fresh cash is needed to fund Intelsat’s obligations under the FCC-based C-band auction planned for December this year. One analyst suggests that Intelsat had some $810 million jn its own cash reserves as at December 31st 2019.
Bloomberg News says that Intelsat needs to spend more than $1.5 billion (and it could be as high as $2.5 billion) to prepare its client’s teleports and dish equipment in readiness for the shift to new frequencies and satellites. This work would be carried out over 3 years and if wrapped on time would qualify for full repayment as well as a $4.8 billion compensation/incentive payment by the FCC.