Canada-based satellite operator Telesat has formally cancelled its plans for an additional 1,671 low Earth orbiting (LEO) satellites.
Telesat has already admitted that its important geostationary DTH business is under pressure and is betting its business mainly on a new LEO fleet, called Lightspeed. Lightspeed will comprise about 200 satellites.
The now cancelled 1,671 craft were designed to augment the core Lightspeed fleet and had initially alerted the market to the reduction in April this year, which has now been confirmed. Lightspeed will likely comprise 198 satellites.
Telesat is under a very tight investment plan. It has some C$2.4 billion (€1.48bn) of debt which matures next year, and a further C$604 million due to be repaid in 2027. As to its own cash reserves it has some C$401 million at hand. No doubt some of the debt obligations can be restructured/reissued, but financially it has to tread carefully.
Bloomberg is reporting that advisers representing creditors of Telesat are preparing to sign non-disclosure agreements (NDAs) with the Company as it looks to address debt obligations maturing next year, according to Bloomberg.
Telesat’s financial and legal advisers, PJT Partners Inc. and Kirkland & Ellis, were reportedly expected to meet with creditor representatives this past Tuesday to begin due diligence and open discussions.
The move comes after Telesat announced on September 12th that it had completed the transfer of 62 per cent equity in its Telesat Lightspeed unit to an indirect subsidiary of Telesat Corp. This subsidiary is wholly owned by Telesat Canada’s parent companies and does not guarantee Telesat Canada’s existing debt.
Moody’s Ratings has already downgraded Telesat Corp ‘s corporate family rating to Caa2 from Caa1. At the same time, the ratings agency downgraded the senior secured bank credit facility and senior secured notes ratings of Telesat’s main operating subsidiary, Telesat Canada, to Caa2 from B3 and the senior unsecured notes rating to Ca from Caa3.
On the upside Telesat has solid contracts in place with various Canadian regions for Lightspeed coverage.
