Intelsat says it has received backing from some of its creditors – holding some $3.8 billion of the company’s debt – to reduce its overall debt by some 53 per cent from around $15 billion to $7 billion.
As at September 30th the company owed $14.4 billion to its creditors. Intelsat has filed its Plan of Reorganisation with the US Bankruptcy Court. Intelsat said: “Intelsat looks forward to continuing to engage with all stakeholders to gain additional support for its Plan across the capital structure.”
Intelsat has asked for a formal Court hearing on March 17th to request approval for its scheme. But there’s a sting in the tail with Intelsat also warning that if its plan is not accepted and it is forced into a full Chapter 7 liquidation then the consequences – it says – could be dire. Chapter 7 would see bankruptcy trustees sell of the company’s assets.
IntelsatOnward, a new website for the business, explains the plan in detail. Intelsat said: “This is a positive development — and transformational moment — in the history of Intelsat, as we are using our financial restructuring process as a mechanism for investment and growth. Some companies embark upon a restructuring process unclear about a chosen path or an end goal. That is not the case here. Our financial restructuring is an opportunity to enhance our liquidity and emerge with a strengthened balance sheet to complement our strong operating model and future growth plans.”
However, the company explains that some aspects of the business are NOT included in the restructuring. These include Intelsat General (IGC), which serves the Company’s US commercial, government, and Allied military customers, is not part of the Chapter 11 proceedings.
Intelsat stresses it will continue it work on clearing C-band frequencies and launching new satellites for coverage over the US. Intelsat is due to receive $4.87 billion in FCC-approved ‘incentive’ payments from the 5G auction.
As to its current financial health, the company says: “Intelsat has secured $1 billion of new financing. This financing – coupled with significant cash on hand and positive cash flow generated by the business – will provide ample liquidity during the process to support ongoing operations, fund the substantial upfront clearing costs, and allow the Company to continue investing in the innovations and services that its customers need today and in the future.”
The alternate threat of a Chapter 7 bankruptcy sell off would see – says Intelsat – a series of much reduced valuations. They include:
· Gogo, which Intelsat paid $400 million last year, being closed
· Intelsat’s property assets – including Teleports – fetching between $106 million-$134 million
· Intelsat’s orbiting assets being sold for just $2 billion-$2.2 billion
Still outstanding is the SES legal action against Intelsat where SES is claiming $1.8 billion for what it alleges is unfair practice during the C-Band Alliance processes. This legal claim is also before the same bankruptcy court handing Intelsat’s restructuring. The current schedule calls for a hearing before the court on June 28th. Intelsat is asking for this claim to be rejected.