Tokyo/New York: SoftBank Group Corp. is close to scrapping a plan to merge its OneWeb Ltd with Intelsat SA if some of the Luxembourg-based satellite company’s bondholders continue to insist on a higher price, according to people familiar with the matter.
Intelsat extended a deadline for bondholders to approve the deal until 15 May without reaching an agreement, the company said Thursday. The situation is fluid and a deal could still be salvaged, but SoftBank has one and a half feet out the door, said one of the people, asking not to be identified because the matter is private. The Japanese company has been approached by multiple parties offering an alternative to Intelsat’s capabilities, though it will not pursue negotiations until the current talks are concluded, said the person.
OneWeb, the US satellite start-up backed by SoftBank, said in February that it planned to combine with Intelsat, an older, larger satellite provider. But the deal is contingent on Intelsat persuading its bondholders to accept a buyout that would give them an average of 74 cents on the dollar and ease Intelsat’s struggle with its $15 billion debt load.
Creditors have resisted those terms and have asked SoftBank to inject more cash for the debt exchange. As an earlier offer expired at midnight 10 May New York time, a group that owns Intelsat’s Jackson bonds showed willingness to compromise, while its Luxembourg noteholders insisted on 95 cents, the person said.
A spokeswoman for Intelsat declined to comment before the deadline.
Intelsat’s bonds have traded well below that level. Intelsat Luxembourg’s 7.75% notes due 2021 traded at 53.5 cents, while its 8.125% Luxembourg notes due 2023 fetched 53 cents on Wednesday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Threatening to walk away from the deal works to SoftBank’s advantage because it could push down bond prices and force noteholders to compromise.
Intelsat creditors made a counter-proposal after the offer was announced in February asking to be paid out at or close to par, Bloomberg previously reported. Luxembourg noteholders are being advised by Centerview Partners LLC and law firm White & Case LLP, while Jackson bondholders are working with Houlihan Lokey Inc. and law firm Kirkland & Ellis LLP.
Some of Intelsat’s bonds traded at prices well above what the company initially proposed after the deal was announced, indicating that the terms might need to be sweetened to get the required 85% of the notes signed up for the deal. SoftBank had said it would invest $1.7 billion in cash and hold a 39.9% voting stake in the combined company, according to a statement in February.
The impasse was reflected in the tally of bonds committed to the debt exchange so far. Only about $31 million of notes were signed up as of Wednesday, with each of the seven individual issues attracting less than 1% of their total outstanding, according to the company statement. Bloomberg