PRAGUE – Satellite fleet operator Intelsat on May 12 offered holders of three lines of its unsecured debt the chance to cash in for between $710 and $755 per $1,000 of principal, plus an early-bird premium of $20 expiring May 25, for a maximum of $625 million. The tender’s overall deadline is June 9.
The $625 million figure is about half the $1.25 billion in secured debt that Intelsat issued in March, at an 8 percent interest rate and due in 2024, suggesting that a similar tender is likely to follow for about the same amount in the near future.
Intelsat’s bonds have been trading at steeply discounted rates in recent months as investors worry that the company will have trouble servicing its debt, which as of March 31 was $15.8 billion, about eight times its EBITDA, or earnings before interest, taxes, depreciation and amortization.
The three debt lines in question have been trading at rates well below Intelsat’s current offer.
Intelsat said it would pay holders of a tranche due in 2021 paying 7.5 percent $755 per $1,000 of face value. An additional $20 per $1,000 will be paid for those confirming their transactions by May 25, Intelsat said.
Debt due in 2022 and paying 6 and five-eighths percent interest are being offered $720 per $1,000. Intelsat’s 5.5 percent bonds due in 2023 will be paid $710.
Given the occasionally heavy trading in Intelsat’s in recent months, many of the current bondholders may be able to turn a quick profit. The three debt tranches had been trading as low as $650 per $1,000 for the six and five-eighths bond, around $670 for the 5.5 percent tranche and around $730 for the 7.5 percent debt.
Ratings agency’s Moody’s Investor Service and Standard & Poor’s in March had suggested that Intelsat might adopt such a strategy, saying the addition of $1.25 billion of secured debt on Intelsat’s books would make it less likely that unsecured creditors would collect the full par value of their bonds.
Moody’s said that, in its view, such a strategy would constitute “limited defaults,” a characterization that Intelsat strongly rejected. “This is a tender offer, that’s all it is,” Intelsat Investor Relations Vice President Dianne J. VanBeber said in a May 12 interview.