I Intelsat SA

By Matt Wirz 

Satellite operator Intelsat SA's bonds hit record lows Thursday as fears grew that the company will receive far less than expected when the Federal Communications Commission auctions off the C-band spectrum the company uses for its video and radio services.

Intelsat bonds were the most actively traded corporate debt securities in the U.S. Thursday morning with about $830 million face amount changing hands, accounting for roughly 6% of all trading, according to data from MarketAxess. The firm's 9.5% bond due 2023 fell to a record low of 43 cents on the dollar, down from 56 cents Wednesday and 71 cents last week.

Thursday's moves marked the latest turn in a rollercoaster-ride for traders who have placed big bets on the company's fortunes. The company has about $14 billion of debt outstanding, giving hedge funds a venue to wager heavily on the outcome of the auction, which will free up use of the C-band for new fifth-generation, or 5G, wireless networks.

The trade punished large bondholders in November when the FCC rejected a proposal by Intelsat and others to auction the spectrum privately, then prices rebounded in December when rumors circulated that the company and the FCC were discussing a compromise, analysts said

Selling started early this week, then accelerated Wednesday when Reuters reported that the FCC plans to make a relatively modest incentive payment to Intelsat and other satellite companies that use the spectrum, like SES SA. Speculation spread that the companies would receive about $5 billion rather than a prorated share of auction proceeds, prompting bondholders to bail out, the analysts said.

"We've tried to establish for the record that the actual value of the spectrum is between $43 billion and $77 billion," said Dianne VanBeber, vice president for investor relations at Intelsat. "We have a fiduciary duty to our stakeholders and can't surrender the value of our rights for less than the market value."

A spokesman for the FCC declined to comment

U.S. government bond yields dropped Thursday after the U.S. Commerce Department reported 2.1% growth in GDP in the fourth quarter, the slowest rise since 2016, and as concerns mounted that the coronavirus could spread globally. The yield of the 10-year Treasury was around 1.551% compared with 1.593% Wednesday, according to data from Tradeweb.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, slipped Thursday to 90.82 from 90.88 on Wednesday.

Write to Matt Wirz at matthieu.wirz@wsj.com

(END) Dow Jones Newswires

January 30, 2020 13:30 ET (18:30 GMT)

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