Telesat lenders offer $3.2 billion rescue

The Wall Street Journal reported Monday that lenders to the Ottawa-based satellite operator Telesat offered a $3.2 billion rescue package.

The funds are intended to repay debt maturing in December. Under the plan, Telesat would raise $1.7 billion in new equity and borrow $1.5 billion, according to The Wall Street Journal.

The Globe and Mail reported Tuesday that lenders handed over the proposal on Oct. 14 and would be repaid in full with accrued interest. Existing shareholders could buy the new shares for $31.50, roughly half Monday’s closing price, a discount to the prior close.

The Globe and Mail story came after The Wall Street Journal first disclosed the offer. Telesat shares dropped almost 10 per cent in Toronto trading on Tuesday after the terms became public. Silver Point Capital, GoldenTree Asset Management and Sound Point Capital Management are in the lender group. The group submitted proposals in both August and October.

The October package is the lenders’ second rescue offer, the first having come in August. Telesat acknowledged both offers. The company has not negotiated their terms, according to a source cited by The Globe and Mail. Telesat Chief Financial Officer Donald Tremblay issued a statement saying the company still seeks a negotiated outcome in good faith.

Telesat has said publicly that it continues to seek a negotiated resolution. Dan Goldberg, Telesat’s chief executive officer, said on the August earnings call that Chapter 11 bankruptcy is not under consideration. He stressed the need to refinance the debt before maturity and reach a consensual outcome with lenders.

Telesat GEO’s older geostationary satellites carry roughly $2.4 billion in loans and notes maturing in December. Expected cash flows will not cover the obligation. Its first payment comes due Dec. 6.

Telesat’s second-quarter filings say cash on hand and available cash flows will not cover the subsidiary’s GEO debt. The filings create substantial doubt about its ability to pay. Cash stood at $160.8 million at the end of June.

Lenders sued Telesat in January in New York and Ontario regarding the September 2025 Lightspeed stake transfer. The move placed a 62 per cent stake in Lightspeed, the low Earth orbit broadband constellation, in a subsidiary outside their collateral. Lenders call the transfer a fraudulent conveyance meant to shield assets from creditors.

The claims remain unproven in court. Telesat says the transfer was lawful.

Telesat is not covered by standard insolvency law under the Telesat Canada Reorganization and Divestiture Act from 1991. Winding up the company’s affairs requires an Act of Parliament under the 1991 statute.

David McFadgen, an analyst at ATB Cormark Capital Markets, told The Globe and Mail in September that a Telesat default is not unlikely. The remark came before the second rescue offer was made public.