Satellite firm Intelsat SA (I) sunk 18% in Wednesday’s trading as the company announced that it has undergone financial restructuring to “position the company for long-term success.” Shares have plunged 89% year-to-date.
Intelsat and certain subsidiaries have now filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division. Intelsat General (IGC) is not part of the Chapter 11 proceedings.
In the meantime, Intelsat’s day-to-day operations and capital investments will continue as usual, says the company. It also announced that it has secured a commitment for $1 billion of debtor-in-possession financing.
According to the statement, the restructuring process will improve Intelsat’s liquidity and substantially reduce its legacy debt burden. This will allow “for Intelsat to emerge with a strengthened balance sheet to complement its strong operating model and future growth plans.”
One of the primary catalysts for restructuring the balance sheet now is to meet the FCC’s accelerated clearing deadlines in support of a build-out of 5G wireless infrastructure in the US.
For Intelsat to meet this deadline, and ultimately be eligible to receive $4.87 billion of accelerated relocation payments, the company needs to spend over $1 billion on clearing activities. These clearing activities must start immediately, long before costs begin to be reimbursed, says Intelsat.
The company is also managing the economic slowdown impacting several of its end markets caused by the Covid-19 global health crisis. Indeed, I has received four analyst downgrades in the last three months, giving the stock a Moderate Sell consensus.
The $0.75 average price target indicates further downside potential of 5%, with Goldman Sachs’ Brett Feldman citing Intelsat’s exposure to the cruise-ship, aviation, and traditional media businesses as cause for concern. (See I stock analysis on TipRanks).
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