TR Daily Intelsat Files for Bankruptcy, Commits to C-Band Transition
Thursday, May 14, 2020

Intelsat Files for Bankruptcy, Commits to C-Band Transition

In announcing that it has filed for Chapter 11 bankruptcy protection, Intelsat S.A. has committed to participating in the accelerated clearing of C-band spectrum under a process approved by the FCC earlier this year (TR Daily, Feb. 28).

When the FCC adopted its item in the proceeding, which set the stage for repurposing 300 megahertz of spectrum in the C-band for 5G terrestrial use, Intelsat said it would “preserve all options to ensure our company is treated fairly and to protect our spectrum rights” as the company complained that it would be short-changed in its share of accelerated relocation payments. Intelsat also argued that the FCC’s order exceeded its authority.

Under the order, Intelsat can receive nearly $4.87 billion of the $9.7 billion reserved for accelerated relocation payments. Rather than the approximately 50% of the total pot, Intelsat had argued that it should get between 60 to 67%, and it split from other members of the C-Band Alliance.

These are the other providers eligible to receive accelerated relocation funding: SES S.A., Eutelsat S.A., Telesat Canada, and Star One.

“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 order in support of a build-out of 5G wireless infrastructure in the United States,” Intelsat said in a news release issued late last night announcing its bankruptcy filing in the U.S. Bankruptcy Court for the Eastern District of Virginia (Richmond Division). “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.”

“This is a transformational moment in the history of our company,” Intelsat Chief Executive Officer Stephen Spengler said of the bankruptcy filing, which had been expected for some time. “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.”

“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,” the company said in the news release. “The Company will continue to drive its business forward – launching new satellites, investing in its ground networks, developing new services, and progressing Intelsat’s next generation network and service strategy at full speed. No changes to the Company’s operations or workforce are planned.”

Intelsat said it “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.”

Sen. John Kennedy (R., La.), a critic of the C-band relocation payments approved by the FCC, said in a statement today that “Intelsat’s decision to file for bankruptcy reveals what many suspected all along: Intelsat had no intention of accepting the FCC’s deal. The FCC should withdraw its offer, take control of America’s spectrum and save taxpayers billions of dollars instead of shelling out that money to foreign companies.”

But others are not surprised that Intelsat says it is focusing on the C-band transition.

“The single most valuable asset for the enterprise is the opportunity to obtain the $4.9 billion accelerated transition payment. Clearly, the company leadership understands that and I expect the bankruptcy judge will too. But bankruptcy adds some risk, both in terms of timing and outcome, to the process,” Blair Levin, an adviser to New Street Research LLP, told TR Daily.

As to whether the bankruptcy filing makes it more or less likely that Intelsat will fulfill its obligations to receive the accelerated relocation funding, Mr. Levin said, “Due to the many more parties involved, there will be a question mark, but in light of how the process makes it easier to obtain financing, I think it replaces a large question mark with a smaller one.”

The FCC’s order also faces legal challenges.

A group of small satellite operators (SSOs) and a satellite transmission company have filed appeals in the U.S. Court of Appeals for the D.C. Circuit (TR Daily, May 4). One appeal was filed by SSOs ABS Global Ltd., Empresa Argentina de Soluciones Satelitales S.A. (ARSAT), Hispamar Satelites S.A., and Hispasat S.A.; another was filed by PSSI Global Services LLC, a satellite transmission company. The SSOs had said they would appeal the order. —Paul Kirby, [email protected]

MainStory: FCC FederalNews WirelessDeployment SpectrumAllocation Satellites

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