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The reasons for and implementation of the restructuring if Intelsat Sa
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This case study examines the reasons for and implementation of the restructuring of INTELSAT SA, in order to provide a better understanding of the underlying circumstances. The case study consists of two parts: The first part analyses the historic financial and operational developments which led to the firm’s default in April 2020. The second part focuses on the ongoing reorganization, and which impact it will generate. The analysis of root causes for INTELSAT’s default resulted in three main reasons, namely: a) over-leverage and high-interest expenses, b) capital gains-oriented shareholders, and c) a cost-intensive order by the FCC to clear the 5G spectrum for mobile network operators. Various default prediction methodologies were utilized to deepen the understanding of the timing and drivers of the default. Specifically, Single-and Multi-Ratio Analyses, Z-Score, O-Score, and the Kealh ofer Merton Vasicek (KMV) –Model provide striking insights. Based on these models (see EXHIBIT 29), one can derive that the default of INTELSAT was not an event due to short-term developments and has been a threat to the firm for years. In the second part of the case, the impact of the reorganisation is analysed. It is concluded that if the reorganisation is conducted as presented by INTELSAT and its creditors, INTELSAT can evolve as a financially stable company again. In addition, a valuation of the equity value after the reorganisation was conducted (see EXHIBIT 46), showing that the future equity value will be close to the value of the compromised debt.
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Private equity Financial distress Bankruptcy Restructuring Space industry