Intelsat bondholders reject merger terms with OneWeb

[NEW YORK] Intelsat SA's bondholders have rejected a proposal to combine the satellite operator with SoftBank Group Corp's OneWeb Ltd, which is set to lead to the deal's termination.

In a statement Thursday, Intelsat said it has notified OneWeb and SoftBank that its bondholders have rejected the offered debt swap, and that it expects the deal to be terminated on June 2.

"We are disappointed that our bondholders were unwilling to accept the terms of the exchange offers presented over the course of this process," said Intelsat chief executive officer Stephen Spengler.

Intelsat's bondholders have been haggling over the price they would receive in the deal and the parties could not reconcile their differences, according to a person familiar with the matter, asking not to be identified because the matter is private.

SoftBank has already begun talks with alternative satellite partners, including Inmarsat plc, said the person. Other prospects include Telesat Holdings Inc. and SES SA, the person said.

Inmarsat shares rose as much as 7.5 per cent in London trading, while SES shares climbed as much as 5.1 per cent.

"Inmarsat does not comment on speculation," said a company spokesman. Bloomberg reported early Thursday that bondholders rejected the deal.

Intelsat announced plans in February for a merger with OneWeb, and the deal was predicated on completing the debt swap.

The exchange was designed to ease Intelsat's struggle with more than US$15 billion of borrowings that piled up as the company endured two leveraged buyouts.

The agreement called for at least 85 per cent of the notes to be pledged before the plan could proceed, and either side was permitted to walk away without penalty if the threshold wasn't met by June 2.

Prices on some of the bonds soared well above what the company offered to investors, who demanded better terms and lined up a big enough group of dissidents to block the exchange.

Less than one per cent of each series of notes had been tendered as of May 17, spurring Intelsat to improve the offer and extend the deadline a fourth time. SoftBank boosted its investment in the merger by US$61.6 million to US$1.79 billion, and said it was unwilling to pay any more.

Despite the collapse of the deal, Intelsat said it would continue to work with SoftBank and OneWeb on pre-existing commercial deals.

BLOOMBERG