SoftBank Said Near Quitting Intelsat Deal Over Bond Standoff

(Bloomberg) -- SoftBank Group Corp. is close to scrapping a plan to merge its OneWeb Ltd. with Intelsat SA if some of the Luxembourg-based satellite company’s bondholders continue to insist on a higher price, according to people familiar with the matter.

Intelsat extended a deadline for bondholders to approve the deal until May 15 without reaching an agreement, the company said Thursday. The situation is fluid and a deal could still be salvaged, but SoftBank has one and a half feet out the door, said one of the people, asking not to be identified because the matter is private. The Japanese company has been approached by multiple parties offering an alternative to Intelsat’s capabilities, though it will not pursue negotiations until the current talks are concluded, said the person.

OneWeb, the U.S. satellite startup backed by SoftBank, said in February that it planned to combine with Intelsat, an older, larger satellite provider. But the deal is contingent on Intelsat persuading its bondholders to accept a buyout that would give them an average of 74 cents on the dollar and ease Intelsat’s struggle with its $15 billion debt load.

Creditors have resisted those terms and have asked SoftBank to inject more cash for the debt exchange. As an earlier offer expired at midnight May 10 New York time, a group that owns Intelsat’s Jackson bonds showed willingness to compromise, while its Luxembourg noteholders insisted on 95 cents, the person said.

A spokeswoman for Intelsat declined to comment before the deadline. SoftBank shares slid 1 percent in Tokyo trading.

Intelsat’s bonds have traded well below that level. Intelsat Luxembourg’s 7.75 percent notes due 2021 traded at 53.4 cents, while its 8.125 percent Luxembourg notes due 2023 fetched 53.8 cents on Thursday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Threatening to walk away from the deal works to SoftBank’s advantage because it could push down bond prices and force noteholders to compromise.

Intelsat creditors made a counter-proposal after the offer was announced in February asking to be paid out at or close to par, Bloomberg previously reported. Luxembourg noteholders are being advised by Centerview Partners LLC and law firm White & Case LLP, while Jackson bondholders are working with Houlihan Lokey Inc. and law firm Kirkland & Ellis LLP.

Some of Intelsat’s bonds traded at prices well above what the company initially proposed after the deal was announced, indicating that the terms might need to be sweetened to get the required 85 percent of the notes signed up for the deal. SoftBank had said it would invest $1.7 billion in cash and hold a 39.9 percent voting stake in the combined company, according to a statement in February.

The impasse was reflected in the tally of bonds committed to the debt exchange so far. Only about $31 million of notes were signed up as of yesterday, with each of the seven individual issues attracting less than 1 percent of their total outstanding, according to the company statement.

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net, Emma Orr in New York at eorr6@bloomberg.net, Jodi Xu Klein in New York at jxu205@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Peter Elstrom, Reed Stevenson