Satellite operator Intelsat filed for Chapter 11 restructuring, saying the move is intended in part to position the company to participate in clearing of C-band spectrum under an FCC order that will provide that spectrum for 5G.
Operators like Verizon, in particular, are expected to participate in the C-band auction, currently scheduled to start in December. It’s part of a years-long effort to make mid-band spectrum available for 5G. Intelsat was a member of the C-Band Alliance, which initially pushed for a private auction of the 3.7-4.2 GHz spectrum before political forces jettisoned that plan.
Intelsat was in financial trouble before COVID-19 but said it’s also dealing with the economic slowdown impacting several of its end markets caused by the COVID-19 global health crisis. Last month, the company, whose customers include aviation and maritime industries that are grounded by the pandemic, withdrew guidance and said it was delaying the filing of first-quarter results.
The financial restructuring will enable Intelsat to position itself for long-term success, according to the company. 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,” Intelsat stated in a press release (PDF).
“This is a transformational moment in the history of our company,” said Intelsat CEO Stephen Spengler in a statement. “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.”
Intelsat has secured a commitment for $1 billion of new financing. Subject to court approval, that financing will help provide liquidity during the process to support ongoing operations and fund the upfront clearing costs.
While it moves as quickly as possible through the restructuring process, Intelsat said its day-to-day operations, engagement with customers and partners, and capital investments will continue as usual, including the launch of new satellites and investments in ground networks.
The FCC in February voted 3-2 to move forward on making 280 megahertz of C-band spectrum available for 5G, saying it was a critical step in getting much needed mid-band spectrum into the market. That came after the commission was accused of offering foreign-owned satellite companies a windfall for spectrum they never paid to use in the first place.