Intelsat Jackson noteholders claim default tied to dividend payment

By Caroline Salls

Pittsburgh, May 25 – Aurelius Capital Management, LP, as manager of funds that own Intelsat Jackson Holdings SA’s 7¼% senior notes due 2020, informed the company on May 13 that defaults had occurred under the notes indenture, according to a letter included in an 6-K filed Wednesday with the Securities and Exchange Commission.

In the letter, Aurelius said a restricted payments covenant contained in the indenture bars Intelsat Jackson from paying dividends or making any distributions to parent Intelsat (Luxembourg) SA, except under specified conditions. One of those conditions is that Intelsat Jackson would have a debt-to-adjusted EBITDA ratio of less than or equal to 6.0 to 1.0 immediately after completion of a transaction.

Aurelius said Intelsat Jackson paid a dividend of $360 million to the parent company in the last five business days of September 2015, then borrowed back that same amount from Intelsat Intermediate LLC.

“Thus, the money did a hasty round trip and ended up where it started,” Aurelius said.

As a result, Aurelius said the September dividend and the intercompany loans that followed violated the restricted payment covenant.

According to a letter sent in response by Intelsat Jackson, “these assertions are baseless.”

Intelsat Jackson said its debt-to-adjusted EBITDA ratio was less than 6.0 to 1.0 after the transaction in question.

The company said Aurelius’ letter “also contains other material errors, including factual misstatements, which need not be addressed here in light of the basic error in your reading of the indenture.”

“Please be advised that Jackson and its affiliates reserve all rights and remedies relating to your conduct and the resulting harm to our company, including your baseless assertion of a default, the misstatements in your letter and the public dissemination of the letter,” Intelsat Jackson said in its letter.

Intelsat Jackson is a subsidiary of Intelsat Luxembourg. Both are subsidiaries of Intelsat SA, a Luxembourg-based provider of satellite services that operates out of McLean, Va.

© 2015 Prospect News.
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