U.S. Markets closed

Intelsat Weighs Chapter 11 Among Options on C-Band Plan

Todd Shields

(Bloomberg) -- Intelsat SA is considering a possible Chapter 11 bankruptcy filing if U.S. regulators don’t increase the amount of compensation the company would receive for giving up some of its airwaves, a person close to the company said.

Intelsat has hired bankruptcy experts at Kirkland & Ellis LLP to prepare for possible restructuring, said the person who spoke on condition of anonymity because the matter isn’t public.

Intelsat plunged as much as 34% to $2.61 before trading was paused for volatility. Intelsat bonds led high-yield declines, as its 9.5% notes due in February 2023 fell 12.3 cents on the dollar to about 50 cents, yielding about 39%.

The Chapter 11 filing would delay the U.S. Federal Communications Commission plan to move forward with an auction of the so-called C-band airwaves because Intelsat assets would be entangled in court proceedings, the person said.

FCC Chairman Ajit Pai on Thursday is to announce his plans for an auction of C-band airwaves currently used by satellite providers, and a leading issue is how much to pay satellite providers including Intelsat and SES SA. The frequencies would be reallocated to mobile service providers.

There’s been criticism in Congress over the prospect of high payments for the two providers, which are based in Luxembourg, for a sale of U.S. airwaves.

On Wednesday, Senator John Kennedy, a Louisiana Republican who has sought to limit payments to satellite providers, in a tweet said “American taxpayers own the C-Band.”

“That’s why there’s a bipartisan plan to use auction $ for American priorities -- NOT as golden parachutes to foreign satellite companies,” Kennedy said in the tweet.

Earlier New Street Research in a research note said there’s a significant chance the C-Band Alliance backed by Intelsat and SES “walks out of the process” should Pai choose a payment that would return an amount the group can’t accept -- anything below $16 billion. Intelsat is carrying debt of more than $14 billion.

The person close the company declined to state the FCC’s latest offer.

Under a proposal another satellite company, Eutelsat SA, filed with the FCC, airwaves auction winners would pay for reimbursing the satellite companies. Payouts would be based on the lost revenue opportunity from the airwaves that are to be sold, rather than calculated as a percentage of revenue from auctioning the airwaves. That would result in about $7 billion to the providers.

The plan Intelsat and SES submitted to the FCC seeks almost half the proceeds of an airwaves auction that could reach $77 billion, to be split among satellite providers.

Markus Payer, a spokesman for the C-Band Alliance, and a representative of Kirkland & Ellis declined to comment. Tina Pelkey, an FCC spokeswoman, declined to comment.

(Updates with share, bond prices in third paragraph.)

--With assistance from Allison McNeely.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.