Double dilemma for Intelsat

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Intelsat’s shares had a torrid time May 5th with a 12.4 per cent fall in value at one point to just $1.10. It isn’t the lowest that Intelsat shares have traded recently ($1.04 on April 15th) but it highlights the anxiety the market has for the company’s future prospects.

One shareholder (Cyrus Capital Partners) is demanding a special shareholders’ meeting to establish Intelsat’s plans and the near-constant market rumours that bankruptcy is on the cards. Cyrus wants Intelsat to pay the $125 million debt interest that was due for payment on April 15th and then granted a 30-day delay. But this means the payment must be made on or before May 15th to avoid risking falling into a bankruptcy by default.

Cyrus is a significant shareholder with a 7.6 per cent stake in Intelsat. “The prospect of a value-destructive bankruptcy filing by [Intelsat’s Jackson Holdings subsidiary], no matter how remote or ill-advised, requires that the Board take all necessary steps to protect the Acceleration Payments from such a process,” Cyrus Capital said in its April 30th letter to the SEC.

Another group of shareholders, led by Appaloosa Investment, wants the opposite to happen. It wants Intelsat to argue for a better incentive payment from the FCC, or else just go for bankruptcy.

The primary worry – amongst many for the company – is that unless Intelsat stays afloat, it places at risk the FCC approved ‘incentive’ payments of more than $5 billion that will be earned at the end of the C-band transfer process.  The FCC has set May 29th as its cut-off date for confirmation that Intelsat will – or will not – participate in its C-band scheme.

A Chapter 11 bankruptcy protection would inevitably pause the whole C-band process and severely affect SES, Telesat and Eutelsat and their plans for participation in the FCC’s scheme.

As reported on April 14th, it is clear that the FCC wants Intelsat’s spectrum in order to push 5G technology over the US.

Also not helping is that Intelsat’s senior management are asking for huge special bonus payments ahead of the company’s formal AGM on June 17th. Steve Spengler, President/CEO, is up for $1.05 million, and CFO David Tolley $650,000. Not bad for a business with some $14 billion of debt.


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