- Star hedge fund manager David Tepper penned a letter to satellite provider Intelsat’s board Tuesday, pressuring leadership to negotiate better terms in a deal it’s facing with the FCC.
- In the deal, Intelsat is seeking compensation in exchange for giving up its rights to its spectrum, which the FCC wants to use to build a 5G mobile network.
- Tepper, whose fund took a 7.4% minority stake in Intelstat, says if the FCC won’t compensate Intelsat better, the company should file for bankruptcy instead.
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David Tepper announced on Tuesday that his hedge fund, Appaloosa Management, has a 7.4% stake in the satellite company Intelsat. He’s using his position to pressure the company to renegotiate terms in a deal it’s facing with the Federal Communications Commission.
The stock was up as much as 6.92% in early trading Wednesday. That’s after a surge Tuesday, when shares traded as high as 33.98% above the previous day’s close, ending trading up 26.2%.
It was welcome relief for the otherwise embattled stock, which was down 77.9% since November 18 of last year. That’s the day Ajit Pai, chairman of the FCC, said on Twitter that the commission would auction off part of satellite operators’ spectrum, some of which Intelsat owns, to be used for 5G.
Tepper said in a Tuesday letter to Intelsat’s board that the company should push for better terms from the FCC than what it’s currently offered for the spectrum.
“We are disappointed, to say the least, with the Board’s and managment’s apparent acquiescence to the broad terms of the FCC’s latest proposal,” Tepper wrote.
The current deal pays Intelsat and other satellite providers $US14.7 billion in exchange for forfeiting rights to spectrum, which the government wants to use to construct a 5G network,CNBC reported. Tepper thinks Intelsat is entitled to more. Intelsat is highly leveraged, he wrote, and the FCC’s offer must be enough to cover “the full weight of financial and execution risks” involved in offloading spectrum.
“The token compensation offered to Intelsat is an affront,” especially when compared to similar deals reached over the past 10 years, he wrote.
Appaloosa joins a number of hedge funds with stakes in Intelsat – though most opened positions last year, before the FCC’s proposal to Intelsat disappointed, and have registed substantial losses because of it, The Financial Times reported.
Yields on Intelsat’s $US15 billion in debt have ballooned since the FCC battle began, according to The Financial Times.
If the company cannot get better terms from the commission, it should forgo a deal altogether, Tepper said Tuesday, and instead file for bankruptcy in order to defend its legal claim to spectrum in court.
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