Intelsat SA offers to exchange existing notes have expired as of midnight on May 31, 2017. According to a statement issued by Intelsat, as of the expiration date, the minimum tender conditions for the exchange notes and consent solicitations had not been satisfied. Intelsat’s creditors have not accepted any of the existing notes for exchange.

The debt exchange was initiated on February 28, 2017 following an agreement brokered by Softbank to merge Intelsat and startup OneWeb. As part of the agreement, Intelsat hoped to exchange its outstanding debt with lower priced notes. Overall, Intelsat was asking bondholders to accept a discount of $2.85 billion. With the deadline passed on May 31 and no agreement in place, bondholders have signaled to Intelsat that they will not accept any discount.

The Intelsat and OneWeb merger – along with the Softbank investment – depended on bondholders accepting a price discount. Without it, the deal will likely fall through.

The failure to convince bondholders to accept a haircut is a major disappointment for all three companies. The deal was part of Softbank’s efforts to increase its exposure to new technologies and business models. Intelsat also saw the deal as a way to innovate and enter new markets. At the same time, the deal offered OneWeb the capital it will need to deploy a massive constellation of satellites on low Earth orbit (LEO).

It also slows an industry-wide trend in which traditional geosynchronous satellite operators and LEO operators are combining. For years satellite companies could be divided into operators of satellites in geosynchronous Earth orbit (GEO) or LEO. Companies like Intelsat, SES, and Telesat operated were in GEO, while companies like Iridium operated in LEO. More recently, companies are combining to leverage the advantages of each orbit. GEO offers broader coverage, while LEO offers improved latency.

It remains to be seen how each company will cope with the fallout of the failed merger attempt.

Image Source: OneWeb