Telesat creditors put forward new proposal as debt repayment deadline draws closer, source says

Lenders to Ottawa-based Telesat Corp. TSAT-T have proposed a new recapitalization plan ahead of a looming debt-repayment deadline that the satellite operator is at risk of missing.

Telesat, which is building a constellation of low-Earth-orbit satellites dubbed Lightspeed, has approximately US$1.71-billion in debt coming due Dec. 6, with another US$438-million of debt maturing in 2027.

The debt was issued by a subsidiary of the company called Telesat Canada and is tied to the company’s fleet of geostationary satellites, an older business division that is in decline. Telesat has said in financial filings that its cash flow is insufficient to meet all of its debt obligations.

The lenders – including Silver Point Capital, GoldenTree Asset Management and Sound Point Capital Management – recently put forward a second proposal to the company, according to a source familiar with the situation. The Globe and Mail is not identifying the source because they were not authorized to speak publicly about the proposals.

Under their latest proposal, which was presented to Telesat on Oct. 14, the lenders would receive 100 per cent of their principal, plus accrued interest, through a new $1.7-billion equity rights offering and a $1.5-billion loan, according to the source.

The proposed equity rights offering, which would allow existing shareholders to purchase shares at $31.50 on a pro-rata basis, could reduce the company’s earnings per share and weigh on the stock price. Shares of Telesat closed down $6.26 or 9.8 per cent at $57.47 on the Toronto Stock Exchange on Tuesday.

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Telesat has acknowledged receiving the lenders’ proposals but has not negotiated with them on the terms proposed in either the new offer or the previous one, which was put forward by the lenders in August, the source said.

Donald Tremblay, Telesat’s chief financial officer, said in a statement that the company and its advisers “continue to seek to engage with the company’s debt holders in good faith to reach a negotiated resolution.”

The lenders said in a statement that they “welcome Telesat’s commitment to engage in good faith, but despite multiple proposals from our group to address its imminent debt maturities, there has been no progress.”

They added, “It’s time for Telesat to match its words with action and work with us on a solution that protects this vital Canadian company and its stakeholders.”

Telesat is currently embroiled in a legal battle with the lenders, who are accusing the company of illegally moving its most valuable asset – the LEO satellite business – out of their reach when the company hived it off into a newly created subsidiary.

Telesat, which was founded in 1969 as a Crown corporation, operates communications satellites, serving enterprise customers such as governments, telecoms, and the airline and maritime industries. The company was promoted in the Canada Investment Summit prospectus circulated among major global funds last month, and in August announced a $2.3-billion contract to deliver Arctic connectivity to the Canadian Armed Forces.

Earlier, Telesat secured $2.54-billion in loans from the federal and Quebec governments to build Lightspeed, which is slated to start offering services in 2028.

“That was the most surprising part, that the government is stepping into this whole thing,” said Jassmine Girgis, a law professor at the University of Calgary specializing in bankruptcy and restructuring law.

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Telsat says in its most recent financial filings that the development of its Lightspeed constellation is “fully funded through equity, financing agreements secured in September, 2024, from the Government of Canada and Government of Quebec, certain vendor financing, and milestone payments” relating to its contract with Canada’s Defence Investment Agency.

“Lightspeed would not exist without the government of Canada,” said Caleb Henry, director of research at space industry research firm Quilty Space. Government support is essential, Mr. Henry said, because Telesat is up against well-capitalized competitors SpaceX and Amazon.

“The competitive environment is very challenging. When investors see constellations that are bankrolled by billionaires, they struggle to see how someone else is going to compete without a billionaire of their own,” he said.

Complicating the debt situation is the Telesat Canada Reorganization and Divestiture Act, which states that “in no case shall the affairs of Telesat be wound up unless authorized by an Act of Parliament.” The act was introduced in 1991 when Telesat was converted from a Crown corporation to a private entity.

Alfonso Nocilla, associate dean of the faculty of law at Western University, said it’s unclear whether the act prohibits Telesat from restructuring under Chapter 11 of the U.S. Bankruptcy Code.

“They can’t file in Canada, potentially, but they might be able to file under Chapter 11,” said Prof. Nocilla, who is also the co-editor of the Journal of the Insolvency Institute of Canada.

“Then you’d have a U.S. court making a decision about U.S. creditors over an asset that’s of national importance to Canada,” he added, noting that telecommunications infrastructure such as the Lightspeed constellation is “very important for sovereignty and for defence.”

The Conservative-led opposition is calling for the military satellite deal to be made public, in part because Prime Minister Mark Carney and Telesat CEO Dan Goldberg are friends.

Mr. Carney and Mr. Goldberg became running buddies when Mr. Carney was Bank of Canada governor, according to The Hill Times, and they ran the London Marathon together when he moved to the Bank of England. When Mr. Goldberg won a local Ottawa business award, Mr. Carney gave a glowing interview about him to the Ottawa Business Journal.

Mr. Carney’s spokesperson Audrey Champoux said in a statement that Mr. Carney “has not participated in any decisions or discussions related to Telesat or Dan Goldberg.” She also said Mr. Carney was not involved in any of the internal preparations for meetings with Telesat or debriefs on them.

The military contract was awarded to Telesat by the Defence Investment Agency, “following the required approval processes,” the agency said in a statement.

Dalhousie University professor Lori Turnbull, who studies political ethics, said that because of his résumé as a central banker, Mr. Carney knows many of the CEOs and leaders that would typically do work with governments.

“Carney is a completely different person than we’re used to in this job,” Prof. Turnbull said, adding that voters chose him in large part because of that network and expect him to use it to Canada’s advantage.

Mr. Goldberg said in a statement that he has been open about his “longstanding friendship with Mr. Carney.”

“I’ve never asked Mr. Carney for government money, for government contracts … or for special treatment of any kind related to Telesat, either before or after he took office,” he said.

With reports from Stephanie Chambers