As long expected, Intelsat has filed for Chapter 11 bankruptcy and says it will restructure itself under ‘Debtor in Possession’ (DiP) rules.
Intelsat says it is fully backing the Federal Communications Commission’s (FCC) plan for the auction of some of its C-band frequencies over the US for 5G usage. It says it has raised $1 billion under DiP financing to help fund the commitment to prepare for the auction.
It stresses that all commitments to continuing its business will continue and these include the building of new satellites for the C-band elements as well as other ongoing satellite build and launch plans.
“One of the primary catalysts for restructuring the balance sheet now is Intelsat’s desire to participate in the accelerated clearing of C-band spectrum under the Federal Communications Commission order in support of a build-out of 5G wireless infrastructure in the United States. To meet the FCC’s accelerated clearing deadlines and ultimately be eligible to receive $4.87 billion (€5.51bn) of accelerated relocation payments, Intelsat needs to spend more than $1 billion on clearing activities. These clearing activities must start immediately, long before costs begin to be reimbursed. The Company is also managing the economic slowdown impacting several of its end markets caused by the COVID-19 global health crisis,” said a company statement.
“This is a transformational moment in the history of our company,” said Stephen Spengler, CEO of Intelsat. “Intelsat is the pioneer and foundational architect of the satellite industry. For more than 50 years, we have been respected for quality, innovation, sector leadership, and premium services. Our success has come despite being burdened in recent years by substantial legacy debt. Now is the time to change that. We intend to move forward with the accelerated clearing of C-band spectrum in the United States and to achieve a comprehensive solution that would result in a stronger balance sheet. This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails.”
The bankruptcy is being handled by the US Bankruptcy Court for the Eastern District of Virginia, Richmond Division. Intelsat General, a separate business which serves governments and military is not affected by the move.
Intelsat was scheduled to make a $125 million interest payment by Friday (May 15th) and this will now lapse. Shareholders, who had long anticipated this move were selling stock on May 13th saw share prices crash to their lowest-ever level, falling 18 per cent during the day to just 79 cents.
Intelsat has some $14.5 billion of debt on its books.