Intelsat Offers $141.8 Million Bond Exchange to Reduce Debt

  • Satellite operator seeks consent to amend bond indenture
  • Whittling away debt at a company that went through two LBOs

Intelsat SA launched a $141.8 million bond exchange, extending efforts to reduce debt that has hobbled the Luxembourg-based satellite operator.

The company is offering to swap $120 of cash and $705 of 8 percent notes due February 2024 for every $1,000 of its existing 6.625 percent notes due December 2022, according to a statement. Investors owning $78.4 million of the old notes have already agreed to participate, the company said.

The cash portion drops to $100 after Sept. 12, and the entire offer expires at 11:59 p.m. in New York on Sept. 26. Intelsat is also offering $65 to investors for their consent to amend the 2022 bond indenture.

The 2022 notes traded at 73.75 cents on the dollar on Aug. 9, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They were quoted at 86 cents as of 10:07 a.m. in New York. While the deal represents a premium for investors, the consent would allow Intelsat to strip away bond covenants, according to analysts at Citigroup Global Markets led by David Phipps. “Intelsat has nearly exhausted its debt capacity,” the analysts wrote.

Intelsat started its life as an international consortium of governments and became a private company in 2001. Since then, debt has piled up as the company went through two leveraged buyouts and bought rival PanAmSat in 2006.

The exchange follows an offer in May to buy back as much as $625 million of notes due in 2021, 2022 and 2023. S&P Global Ratings deemed the below-par purchases “a distressed restructuring and tantamount to default.” It upgraded Intelsat’s corporate credit rating to CCC in July, citing improved liquidity, but S&P assigned a negative outlook because of the potential for more subpar debt exchanges.

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