Intelsat S.A., operator of the world’s
largest and most advanced satellite fleet, announced Thursday that it
has undertaken a financial restructuring to position the company for
long-term success. The restructuring process is intended to enhance
the company’s liquidity and will likely result in a substantial
reduction of Intelsat’s legacy debt burden, allowing for Intelsat
to emerge with a strengthened balance sheet to complement its strong
operating model and future growth plans.
One of the primary catalysts for
restructuring the balance sheet now is Intelsat’s desire to
participate in the accelerated clearing of C-band spectrum under the
Federal Communications Commission (FCC) order in support of a
build-out of 5G wireless infrastructure in the United States. To meet
the FCC’s accelerated clearing deadlines and ultimately be eligible
to receive $4.87 billion of accelerated relocation payments, Intelsat
needs to spend more than $1 billion on clearing activities. These
clearing activities must start immediately, long before costs begin
to be reimbursed. The company is also managing the economic slowdown
impacting several of its end markets caused by the COVID-19 global
health crisis.
“Our success has come despite being
burdened in recent years by substantial legacy debt,” said Stephen
Spengler, Chief Executive Officer of Intelsat. “Now is the time to
change that. 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.
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 facilitate the financial
restructuring, Intelsat and certain of its subsidiaries have filed
voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the
Eastern District of Virginia, Richmond Division. Intelsat General,
which serves the company’s U.S. commercial, government, and allied
military customers, is not part of the Chapter 11 proceedings.
While it moves as quickly as possible
through the restructuring process, Intelsat’s day-to-day
operations, engagement with customers and partners, and capital
investments will continue as usual.
Intelsat has secured a commitment for
$1 billion of new financing. Subject to court approval, this
debtor-in-possession financing, coupled with significant cash on hand
and positive cash flow generated by the business, will provide ample
liquidity during the restructuring process to support ongoing
operations, fund the substantial upfront C-band clearing costs, and
allow the company to continue investing in the innovations and
services that customers need today and in the future.
The company is filing with the court a
series of customary motions seeking to maintain business-as-usual
operations and uphold its commitments to its stakeholders, including
employees, customers, and vendors, during the restructuring process.
Approval of these “first day” motions, which the company expects
to receive in short order, will help facilitate a smooth transition
into the process.