WASHINGTON — Satellite fleet operator Intelsat on July 5 completed a refinancing of slightly more than 10 percent of the company’s debt.
In a July 5 filing to the U.S. Securities and Exchange Commission, Intelsat said the debt swap, which came at a higher interest rate, provides six more years to pay off senior notes originally due in 2019. Those are now due in 2025, but with 9.75 percent interest instead of 7.25 percent. The extra time provides Intelsat more room to try to work down its $14.5 billion debt.
Intelsat had originally planned to use refinancing as a means to address its debt load before its failed merger attempt with OneWeb. Had the OneWeb merger gone through, Japanese telecom giant Softbank would have invested $1.7 billion in Intelsat. That investment combined with a debt swap with Intelsat bondholders was expected to erase $3.6 billion of the operator’s debt, but bondholders disagreed with the terms of the exchange and the merger fell through.
Intelsat conducted a similar bond repurchase in September 2016, buying up bonds that were due in 2022 at 6.625 percent interest and selling bondholders new notes due in 2024 at 8 percent interest.
“Why refinance now (at a significantly higher interest rate) if you still have a couple years until maturity?” Basically, when dealing with distressed debt, ‘time’ takes precedence over coupon. Additionally, with interest rates expected to rise and transponder prices slumping, it made a lot of sense for Intelsat to de-risk this particular note,” Chris Quilty, president of Quilty Analytics, told SpaceNews. “Of course, the bondholders also understand this dynamic, which is why they marked up the coupon on the bonds.”
Intelsat said June 16 that it intended to use the net proceeds from the refinancing combined with with other available cash “to fund the redemption of all $1.5 billion principal amount of Intelsat Jackson’s outstanding 7.25% Senior Notes due 2019 and to pay related fees and expenses.”