S&P rates Intelsat Connect notes CCC-

S&P said it assigned its CCC- issue-level rating and 6 recovery rating to Intelsat SA subsidiary Intelsat Connect Finance SA's (ICF's) proposed $1 billion senior unsecured notes due in 2023. The 6 recovery rating indicates an expectation for negligible (0%-10%; rounded estimate: 0%) recovery for lenders in the event of a payment default.

The company plans to use the proceeds from the proposed notes to repurchase its existing ICF 12˝% senior notes due 2022 ($732 million outstanding) and to repay a portion of Intelsat Jackson SA's debt.

The CCC+ issuer credit rating and negative outlook on Intelsat SA remain unchanged, reflecting S&P’s view that Intelsat's capital structure appears unsustainable over the long term since the company depends on favorable business and financial conditions to meet its financial commitments.

“Despite the proposed transaction, the company will continue to have sizable upcoming debt maturities, with $2.2 billion of notes due in 2020 and $1.6 billion of notes due in 2021.

“We expect Intelsat's leverage will remain elevated in the mid-8x area on modest EBITDA growth over the next few years, with minimal free operating cash flow relative to its heavy debt burden of about $14 billion,” S&P said in a news release.

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