Shareholder urges Intelsat to avoid defaulting into bankruptcy

WASHINGTON — A shareholder is urging Intelsat’s leadership to quickly make an overdue debt payment to avoid potentially falling into bankruptcy. 

Cyrus Capital Partners, a $4 billion investment advisory firm with offices in New York and London, said Intelsat appears to be headed for a Chapter 11 bankruptcy filing after it skipped a $125 million interest payment due April 15. 

The skipped payment triggered a 30-day grace period for Intelsat to complete the payment before defaulting. Intelsat’s subsidiary Intelsat Jackson, which holds the majority of the operator’s $14.7 billion debt, owes the late interest payment. 

In a letter released May 5, Cyrus Capital said an Intelsat bankruptcy could severely jeopardize the satellite operator’s ability to collect up to $4.86 billion in FCC incentive payments for the rapid clearing of 300 megahertz of C-band spectrum Intelsat uses mainly for television broadcasting in the United States. 

Intelsat has until May 29 to decide whether it will participate in the FCC’s accelerated spectrum clearing program. A different Intelsat shareholder, Appaloosa of Short Hills, New Jersey, urged the company in February to press the FCC for a higher amount even if it means Intelsat going into bankruptcy. 

Cyrus Capital’s take is that Intelsat should do all it can to ensure it receives the $4.86 billion “and not to permit any company within the Intelsat group to undermine value at this critical time.”

Intelsat Jackson is by no means insolvent, according to Cyrus Capital, and has the financial means to continue paying its debt.

Cyrus Capital, which has a 7.6% stake in Intelsat, told the satellite operator it should make sure the overdue interest payment is made, and said that Intelsat should create a “bankruptcy-remote” company to ensure it could clear C-band spectrum in the event of a bankruptcy. 

“The prospect of a value-destructive bankruptcy filing by Jackson, no matter how remote or ill-advised, requires that the Board take all necessary steps to protect the Acceleration Payments from such a process,” Cyrus Capital said. 

Cyrus Capital also told Intelsat it should shed its role as guarantor of various subsidiary debt holdings due between 2021 and 2025, saying the guarantees “serve only to risk dragging down the entire Intelsat group in the event of a non-consensual restructuring process.”