Intelsat Files for Chapter 11 Before 5G Spectrum Sales
(Bloomberg) -- Intelsat SA, the satellite company weighed down by almost $15 billion of debt, filed for bankruptcy protection as part of efforts to raise cash needed to prepare its spectrum for a U.S. government auction.
With its Chapter 11 filing in Virginia, the Luxembourg-based company said it lined up $1 billion in financing to fund operations during bankruptcy proceedings and make investments required ahead of the auction.
Under rules set by the Federal Communications Commission, Intelsat may collect $4.86 billion for quickly giving up the so-called C-band spectrum so the airwaves can be used by mobile phone companies to provide 5G services. The satellite company uses the spectrum to beam TV and radio programs to stations, but can give up part of it while still serving customers on frequencies it retains.
“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,” Stephen Spengler, Intelsat CEO, said in the statement.
Intelsat had pushed for a bigger payout, but ran into political and regulatory opposition. Among the most strident critics was Senator John Kennedy, a Louisiana Republican, who said foreign operators such as Intelsat shouldn’t reap a windfall for selling U.S. airwaves. Payments to satellite operators should be limited to $1 billion, he said.
The rest would go to the U.S. Treasury. In January, the FCC signaled that it would limit payments to Intelsat and the other major holder of the airwaves, SES SA. The next month, David Tepper’s hedge-fund firm Appaloosa Management reported an activist stake and called for Intelsat to reject the commission’s plan.
Intelsat had until May 29 to tell the FCC whether it would accept the payments and quickly clear the airwaves. Filing for bankruptcy gives Intelsat the chance to ask a judge to put any dispute with the FCC on hold, according to Bloomberg Intelligence analyst Negisa Balluku.
Under U.S. bankruptcy rules, legal fights are typically halted until the company has a chance to reorganize. One exception involves court battles with state and federal regulators acting in the public interest.
In April, Intelsat skipped an interest payment and began talking to investors, including existing stakeholders, about financing options. The company needs to spend around $1.6 billion to clear the C-band spectrum, of which $1.2 billion will come due by next year, according to Chapter 11 filings. It had about $800 million of cash at Dec. 31.
The case is Intelsat S.A., 20-32299, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).
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