Intelsat Creditors Said to Discuss Debt Swap, Cash Injection

Intelsat SA is discussing a potential debt exchange with bondholders that would inject fresh capital into the satellite operator while giving the creditors a higher-ranking claim on the company’s assets, according to people with knowledge of the matter.

Holders of Intelsat bonds, including its $1.5 billion of 7.25 percent unsecured notes maturing in April 2019, have hired Houlihan Lokey Inc. and Davis Polk & Wardwell to advise them in negotiations, said the people, who asked not to be identified because the talks are private.

Intelsat, which is being advised by Guggenheim Partners LLC, has hired Goldman Sachs Group Inc. to help with the potential capital raising, the people said. The bondholder group negotiating the exchange includes Omega Advisors, they said. The deal under discussion wouldn’t need amendments to the credit agreement, the people said. 

Representatives for Intelsat, Goldman Sachs, Guggenheim and Houlihan Lokey declined to comment. Representatives for Davis Polk and Omega Advisors didn’t respond to phone calls and e-mails seeking comment. 

Stock Jump

Intelsat shares jumped nearly 11 percent at the market open Thursday, rising to $2.54 at 9:48 a.m. in New York.

The company’s $1.5 billion of 7.25 percent senior unsecured bonds maturing April 2019 traded down slightly Thursday to 76.25 cents on the dollar at 10:01 a.m. in New York compared with 77 cents on Wednesday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Its $2.2 billion of 7.25 percent senior unsecured notes maturing October 2020 dropped little more than one cent to 67.9 cents at 9:58 a.m.

The discussions come after Intelsat’s negotiations with senior lenders to loosen its credit agreement stalled last week, the people said. The talks were aimed at allowing the parent company to issue a second-lien loan that would be placed beneath its existing $3.1 billion of term loans. That would enable Intelsat to cut its $15 billion debt load through a bond exchange.

The deadline for the amendment discussions expired Friday after the company agreed to offer 50 basis points and a total of about $8 million on the loans in exchange for the creditors’ approval.

The company is suffering from competitive conditions in the network services industry, which prompted a downgrade in company ratings by Moody’s Investors Service last month.

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