Intelsat declares bankruptcy as means to fund C-band spectrum clearing
Intelsat, the world’s second largest satellite operator by revenue, filed for Chapter 11 bankruptcy protection late May 13 as a means to ease its nearly $15 billion debt load and participate in an FCC spectrum clearing program.
Intelsat said it has secured a $1 billion debtor-in-possession financing commitment that, following court approval, will allow the company to fund continuing operations and get started clearing C-band spectrum under a program that could net the operator $4.86 billion.
The Luxembourg and Virginia-based operator filed for Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond. The company operates a fleet of roughly 50 satellites, and has another, Galaxy-30, scheduled to launch this summer on an Ariane 5 rocket.
Intelsat was thought to be headed toward bankruptcy after it skipped a $125 million interest payment in April, triggering a 30-day grace period before defaulting. The company’s second largest shareholder, Cyrus Capital Partners, told Intelsat it should avoid bankruptcy in order to not jeopardize its chance at claiming the $4.86 billion in accelerated spectrum-clearing payments. That advice was opposite Intelsat’s third largest shareholder, Appaloosa, which urged Intelsat to use bankruptcy as a means of getting the FCC to pay the operator a higher amount.
Stephen Spengler, Intelsat’s chief executive, used the May 13 bankruptcy announcement to confirm Intelsat will participate in the FCC’s accelerated clearing program.
“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,” Spengler said. “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.”
To receive the $4.86 billion, Intelsat has to compress customers from 500 megahertz of C-band into 200 megahertz by December 2023, two years faster than the FCC’s deadline to clear out the spectrum. The FCC is transferring the remaining 300 megahertz of spectrum, used today mainly for satellite broadcasting, to cellular operators for 5G networks.
David Tolley, Intelsat’s chief financial officer, said the company will need to spend around $1.6 billion on the manufacture and launch of new satellites, plus video compression technology and signal filters on the ground to clear C-band for 5G wireless signals. Half that amount, $800 million, will need to be spent by June 2021, before receiving any FCC reimbursement, he said.
Those upfront costs have “created an even greater need for the Company to obtain financing to meet the FCC’s quickly approaching Accelerated Relocation Payment deadlines,” Tolley wrote in Intelsat’s bankruptcy filing.
Tolley said the coronavirus pandemic is projected to reduce Intelsat’s 2020 revenue by $160 million because airplanes and cruise ships aren’t using as much satellite Wi-Fi, and the absence of live sporting events gutted demand for occasional use television broadcasting.
Intelsat General Corp., the military and government business arm of Intelsat, is not part of the Chapter 11 proceedings, Intelsat said.
Intelsat is the third large satellite communications company to declare bankruptcy this year, following network operator Speedcast in April, and megaconstellation startup OneWeb in March. Space News
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