Intelsat Seeks Bankruptcy Loan While Awaiting Key Spectrum Sale
(Bloomberg) -- Intelsat SA is seeking backers for a bankruptcy loan that would keep the satellite service in business under Chapter 11 court protection while it’s waiting for billions of dollars in proceeds from a government spectrum auction. Its bonds led decliners in the high-yield market.
JPMorgan Chase & Co. is shopping the debtor-in-possession loan to institutional investors, many of whom specialize in financial restructuring, according to people with knowledge of the plans. The loan of about $750 million would help fund necessary improvements to Intelsat’s spectrum ahead of the C-Band auction set to begin later this year.
No formal decisions have been made on the loan, said one of the people. The situation remains fluid and plans could change, depending on market conditions, the people said. They asked not to be identified discussing the private arrangements.
The company’s bonds fell Tuesday, with its 8.5% notes due 2024 dropping 4.8 cents on the dollar to 56.9 cents, according to Trace data.
Representatives for Luxembourg-based Intelsat and New York-based JPMorgan declined to comment.
A Chapter 11 bankruptcy filing would allow Intelsat to address its $14 billion debt load as federal regulators head toward an auction of C-Band satellite spectrum. Intelsat needs to spend $1.5 billion to $2.5 billion to prepare its spectrum for sale, and it could net up to $4.8 billion for handing over its C-Band by certain deadlines, according to Bloomberg Intelligence.
Intelsat’s debt starts coming due in June 2021, and its leverage would still remain crushingly high -- around 8 times debt to a key measure of earnings next year -- even if it were to receive the payments for handing over its spectrum, according to BI analyst Stephen Flynn. It had $810 million in cash as of Dec. 31.
The company has been exploring other financing options, including a swap of debt for equity, the people said. The company is working with advisers at investment bank PJT Partners Inc. and law firm Kirkland & Ellis, the people said.
A group of holders of Jackson secured and unsecured debt has organized with Akin Gump Strauss Hauer & Feld as legal adviser and Centerview Partners as investment bank, the people said. A group of creditors in Jackson unsecured, Luxembourg and Connect Finance notes is working with Houlihan Lokey as financial adviser and law firm Jones Day.
Representatives for the advisory firms declined to comment or didn’t respond to messages.
The telecom company was already going to struggle in 2020 before the global pandemic, but “now, unprecedented disruptions in both broadband mobility” and live telecasts are “sure to exacerbate the situation,” Cowen & Co. analyst Lance Vitanza warned in a note last month.
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