Intelsat<\/b> has positioned its filing for Chapter 11 bankruptcy protection as a move that will give the company liquidity to support clearing the C-band spectrum \u2014 but it\u2019s possible that bankruptcy proceedings could put the auction at risk. <\/p>\n
Intelsat and some of its subsidiaries filed on Wednesday in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division. Intelsat, which operates a fleet of about 50 satellites, had approximately $14.7 billion principal in outstanding third party debt at the end of 2019, according to the company\u2019s most recent 10-K filing with the Securities and Exchange Commision. <\/p>\n
The company\u2019s upbeat \u201cIntelsat Onward\u201d announcement made clear that its desire to receive accelerated relocation payments for clearing C-band spectrum was a factor in filing. Intelsat is eligible to receive the largest share, $4.87 billion, about half of the total payments. Intelsat said it needs to spend more than $1 billion on clearing activities, which must start immediately, and costs will not be reimbursed until later. <\/p>\n
[Intelsat Files for Chapter 11 Bankruptcy Protection]<\/em><\/p>\n The FCC <\/b>approved the use of accelerated relocation payments when it approved the order calling for a public auction for C-band spectrum in February. Satellite operators are required to clear the mid-band spectrum so it can be made available for 5G. They will receive both compensation for the cost to relocate the spectrum and accelerated relocation payments to incentivize them to clear the spectrum quickly, up to $9.7 billion total. <\/p>\n An FCC spokesperson said Thursday that the Commission \u201cappreciates\u201d Intelsat\u2019s statement of its desire to participate in the accelerated spectrum clearing. \u201cWe will continue to move forward with the C-band auction process and look forward to working with satellite operators, wireless companies, and others toward that goal,\u201d the spokesperson said. The auction is set to start Dec. 8. <\/p>\n But it\u2019s possible that the bankruptcy proceedings could hinder Intelsat\u2019s clearing of the C-band. <\/p>\n Attorney Owen Kurtin of Kurtin PLLC<\/b> believes that the Chapter 11 filing gives Intelsat leverage over the FCC and its creditors. Kurtin cites a 2003 case FCC v. NextWave Personal Communications, in which the U.S. Supreme Court held that under section 525(a) of the U.S. Bankruptcy Code (11 U.S.C.), the FCC could not revoke the spectrum license of a bankrupt licensee of that spectrum just for failure to make timely payments of the license fees.<\/p>\n \u201cRight now, the FCC cannot just revoke [Intelsat\u2019s] spectrum without the bankruptcy court saying it\u2019s OK. And probably, the bankruptcy court is not going to say it\u2019s OK right away,\u201d he said. \u201cThere\u2019s a stay in effect and the FCC cannot revoke Intelsat\u2019s licenses. So they can\u2019t auction those licenses.\u201d <\/p>\n Kurtin said there are \u201cinfinite possibilities\u201d for what may be going on or being contemplated under the radar, and what is possible in terms of concessions from the FCC or Intelsat\u2019s creditors. <\/p>\n There have been reports for the past few months that Intelsat was taking action moving toward bankruptcy because of the C-band auction. In February, before the FCC published its draft C-band order, Bloomberg Law reported that Intelsat had hired Kirkland & Ellis<\/b> to consider a possible Chapter 11 bankruptcy if U.S. regulators did not increase the company\u2019s compensation for C-band spectrum. Intelsat\u2019s bankruptcy release indicates that Kirkland & Ellis is serving as counsel. <\/p>\n And later in February, after the FCC\u2019s draft order was released, David Tepper, President of Appaloosa LP<\/strong>, which owns approximately 7.4% of Intelsat\u2019s common stock, urged Intelsat\u2019s Board of Directors to negotiate the agreement or file for bankruptcy to protect the spectrum. <\/p>\n \u201cFailing that [negotiation], we believe the Board has no choice but to resort to bankruptcy and litigation in order to protect Intelsat\u2019s valuable license rights from an illegal modification,\u201d the Feb. 18 letter said. Appaloosa on Thursday declined to comment. <\/p>\n Analyst Giles Thorne, the managing director of Equity Research for TMT at Jeffries<\/strong> said that Intelsat filing for bankruptcy has been \u201con the cards for a while.\u201d He said the FCC\u2019s change toward a public C-band auction was the lead indicator that a bankruptcy would come, but signs can be traced back to the failure of Intelsat-29e, or the launch failure of Intelsat-27 in 2013. <\/p>\n \u201cThis is a stage-managed orchestration with $1 billion of debtor-in-possession funding already committed. This will see Intelsat through the C-band process, which will see it (hopefully) secure the $4.8 billion in accelerated relocation payments, and onto a future as a rehabilitated Lazarus walking a few years down the track,\u201d Thorne said. \u201cIntelsat\u2019s asset base is challenged but ultimately systematic to the global satellite sector.\u201d <\/p>\n Last month, Intelsat opted into a 30-day grace period on an interest payment due April 15. When asked about possible bankruptcy filing and the grace period in an interview with Via Satellite<\/em> last month, CEO Steve Spengler said Intelsat was in a \u201ctransition period.\u201d <\/p>\n \u201cEnhanced financial flexibility has become increasingly important to Intelsat, and many others, in light of new challenges facing the global business environment due to COVID-19. It\u2019s also important to us in light of the recent FCC C-band spectrum order, which \u2013 if we choose to proceed with clearing the C-band \u2013 will require hundreds of millions of dollars of incremental capital expenditures before costs begin to be reimbursed by the FCC. So, we\u2019re in the process of exploring a range of financing options with new and existing stakeholders,\u201d Spengler said at the time. <\/p>\n CEO Steve Spengler said in the Chapter 11 release that this filing is an effort to change the \u201csubstantial legacy debt\u201d that burdens Intelsat\u2019s success. \u201cWe 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,\u201d he said. <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Intelsat has positioned its filing for Chapter 11 bankruptcy protection as a move that will give the company liquidity to support clearing the C-band spectrum \u2014 but it\u2019s possible that bankruptcy proceedings could put the auction at risk. Intelsat and some of its subsidiaries filed on Wednesday in the U.S. Bankruptcy Court for the Eastern District of […]<\/p>\n","protected":false},"author":1,"featured_media":48977,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[2],"tags":[],"class_list":["post-59720","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/59720"}],"collection":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/comments?post=59720"}],"version-history":[{"count":0,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/59720\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media\/48977"}],"wp:attachment":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media?parent=59720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/categories?post=59720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/tags?post=59720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}