Telesat takes out US$120 million loan as debt payment loom, shares fall 13%

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Or sign-in if you have an account.The money will be used to “support our legacy business,” according to CEO Daniel Goldberg. Photo by Jean Levac/PostmediaTelesat Corp., the biggest Canadian-based satellite operator, took out a US$120 million term loan this month as it prepares to deal with more than US$2 billion of existing debt coming due in the near future.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe Ottawa-based company disclosed the new loan alongside quarterly earnings on Thursday and said it would be used for “general corporate purposes.” It didn’t give the identity of the lender.The money will be used to “support our legacy business,” chief executive Daniel Goldberg told analysts, referring to the satellites it runs in geostationary orbit, as opposed to a new business of low-Earth orbit satellites that the company is launching soon. “In the fullness of time, we’ll file the loan agreement as well.”Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againThat legacy business is in decline. Telesat reported a 25 per cent drop in revenue and a $12.7 million operating loss in the second quarter. The shares were down 13.4 per cent shortly after 1 p.m. in New York trading.The company owes about US$2.1 billion in four tranches of debt that mature over the next 14 months.In December, a term loan of US$1.32 billion and a senior secured note for US$387 million both mature. Next June, a senior secured note worth US$225 million comes due, followed by a senior unsecured note of US$213 million in October 2027.Current cash flows and reserves do not cover upcoming obligations, Telesat’s filings warn. The company said it’s had multiple discussions with lenders’ advisers in the past nine months about refinancing.Last year, the company restructured itself so that private loans would be secured against the business of geostationary satellites, known as Telesat GEO, but not against its new low-Earth orbit business. That prompted a creditor lawsuit, which is ongoing. Telesat is challenging the suit.“Management believes that existing debt obligations will be addressed in a manner that will allow Telesat GEO to continue as a going concern,” the company said in a filing Thursday. But, it added, there’s no guarantee it will be able to do so. “This material uncertainty, that relates solely to the upcoming Telesat GEO Debt maturities in December 2026, casts substantial doubt as to Telesat GEO’s ability to meet its debt obligations as they come due.”Telesat shares jumped 37 per cent in United States trading on Aug. 4 after it signed a 15-year contract for its planned constellation of low-Earth orbit satellites to provide connectivity for Canada’s military. The deal has a total value including options of $2.7 billion.Telesat added on Thursday it’s also eligible to receive US$189 million in payments from the U.S. government in exchange for repurposing airwave rights for terrestrial use.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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