Last year we described Intelsat as a Zombie. Readers who have seen Walking Dead will know that zombies just keep on walking with bits falling off them until eventually someone does the decent thing.
The news has now broken that Intelsat is shedding an arm. It is trying to sell its video distribution assets in the USA. They generate $400m EBITDA and Intelsat is seeking an heroic $4bn for them.
Two obvious problems arise.
Firstly this is a shrinking business, being cannibalised by fibre and OTT, so hardly a growth generator.
Secondly, it consists of the sub-scale Galaxy assets bought from Panamsat which will be difficult to manage and replace. A new owner would be competing with an Intelsat which is about to launch a new generation of EPIC Ku band satellites designed to deliver video more cheaply. “Buy my rubbish assets so I can whip you with fancy new ones” isn’t a great pitch.
This is not a business to command a fancy multiple. If it can’t sell at a premium, Intelsat will reduce its ability to service debt as much as its debt burden. The only saving grace could be if these assets support the most toxic lightly secured bonds in Intelsat’s impossible to understand bond waterfall, which have been trading in the 70s. In which case perhaps the bonds can be bought back cheaply making sense of the deal. But bond traders don’t usually miss a trick that simple.
Perhaps the best case scenario is that Intelsat just gets smaller, making the inevitable zombie apocalypse easier to deal with.