Intelsat-OneWeb deal collapses over failed debt swap

Intelsat 33e

Intelsat said it expects its planned Softbank-backed merger with affordable internet provider, OneWeb, to now be terminated after failing to agree a debt exchange agreement.

The satellite operator said that its offer to swap outstanding senior unsecured notes had not been accepted and that the minimum tender conditions for the offer had not been satisfied.

As a result, the company said it expects that OneWeb and SoftBank will exercise their respective termination rights under their merger and related share purchase agreement.

“There were many stakeholders’ interests that needed to be satisfied in this complex transaction,” said Intelsat CEO Stephen Spengler. “We are disappointed that our bondholders were unwilling to accept the terms of the exchange offers presented over the course of this process.”

However, Spengler said that even without a merger, the pre-existing commercial agreement between Intelsat, OneWeb and SoftBank “will continue”.

“Under this agreement, we plan to jointly develop integrated solutions utilising both of our fleets and to act as a sub-distributor to SoftBank for the attractive application segments of mobility, energy, government, and connected car.

“As we create integrated services for these applications, we expect to accelerate and enhance our goal of unlocking new and larger opportunities in the communications landscape.”

Intelsat announced in February plans to merge with OneWeb in a share-for-share transaction, with Intelsat also agreeing a share-purchase agreement with OneWeb investor SoftBank.

SoftBank was due to invest US$1.7 billion in newly issued common and preferred shares of the combined company – a move designed to help reduce Intelsat’s debt by approximately $3.6 billion. This would have resulted in SoftBank taking an approximate 39.9% voting stake in the combined business.

SoftBank committed to invest US$1 billion in OneWeb in December, to help support OneWeb’s vision of delivering affordable, high-speed, low-latency internet to rural and remote communities around the world.

The OneWeb deal was designed to “significantly strengthen” Intelsat’s capital structure and help it to accelerate into new areas, such as providing connectivity for connected vehicles.