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SES and Intelsa Resume Merger Talks; EUR 29s ~18bps Cheaper

COMMUNICATIONS
  • BBG sources report that SES SA (Baa3/BBB) and Intelsat SA (NR/NR/BB-) have resumed merger talks after initial attempts in 2023 failed. The sources note the potential for Intelsat to attract other buyers. Talks are ongoing and both companies are working with advisors though no deal is guaranteed.
  • Tough situation to get a read on given the lack of public financial reports for Intelsat. Consolidation of some type seems to make sense to us on some level given overlaps between the two businesses and threats faced from the likes of Starlink. However, the sharp move lower in SES equity and move wider in credit spreads just now implies concerns and we note talk from the last round of negotiations about the potential for a high degree of regulatory scrutiny.
  • This deal aside, we had previously view viewed the SES credit as attractive; each of their lines are held in CSPP though the 29s seem to have decent flows and offered pickup vs. similarly rated TMT names. Strong deleveraging using C-Band proceeds and the long-awaited receipt of mPOWER revenues in the coming months spoke well to the potential for a rating upgrade though the potential merger with lower rated Intelsat is a clear complication here.
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