Intelsat aiming to cut debt in half through bankruptcy

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WASHINGTON — Intelsat hopes it can eliminate around half of its $15 billion debt load through its recent bankruptcy, a change that would free the company to invest in next generation satellite technologies, according to a company executive. 

“This was something that we’ve had to deal with for a while,” Samer Halawi, Intelsat’s chief commercial officer, said of the company’s debt during a May 15 SpaceNews webinar. “It was a burden on us, and it wasn’t allowing us to invest in as much of the innovation and new things that we have wanted to over the years.”

Intelsat accumulated most of its heavy debt load in the 2000s through a series of private equity buyouts and its merger with former rival PanAmSat. In the years since, Intelsat’s revenues and business backlog have continued to gradually shrink while its debt load stayed largely the same. 

Halawi estimated the Chapter 11 bankruptcy process Intelsat filed May 13 will take around six to 12 months to complete. Once finished, he said Intelsat will be able to invest more aggressively in technology such as universal modems that would enable user terminals to link with any operator’s satellites instead of just one network. 

Halawi said Intelsat still has the means to start buying a series of second-generation satellites while in bankruptcy thanks to $1 billion of debtor-in-possession financing. That funding will also allow Intelsat to procure C-band replacement satellites needed to participate in the FCC’s upcoming spectrum auction and potentially net the operator $4.86 billion, he said. 

Intelsat expects to delist from the New York Stock Exchange as part of its bankruptcy, Halawi said. The company is not planning to lay off any employees, he said, nor is it seeking assistance through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, legislation the U.S. enacted March 27 to mitigate the financial impacts of the pandemic.

Analysts said Intelsat’s bankruptcy could reshape the company so that it emerges a leader in the satellite communications industry. 

“What this sector has needed is a strong leader, and Intelsat was kind of the biggest and kind of the oldest, and could have been that leader, but it came to market with all sorts of problems,” said Giles Thorne, an equity analyst at Jefferies. “Intelsat restructuring, getting its house in order … I think is very exciting for this sector.”

Armand Musey, president of Summit Ridge Group, said bankruptcy gives creditors a chance to suggest — and in some cases force — difficult changes to a company like Intelsat that can ultimately make it stronger.