Telesat's lenders face a wall between old satellites and Lightspeed

Term lenders reportedly offered C$2.3 billion against about C$2.4 billion due in December. Lightspeed's money and warrants belong to Ottawa and Quebec, leaving GEO creditors dependent on new money.

Telesat's term lenders have reportedly offered C$2.3 billion to help repay debt that falls due in December. That is less than the roughly C$2.4 billion owed, and the company's best assets sit behind a fence the lenders cannot cross.

The lenders can only be repaid with new money. Telesat is two companies inside one filing, and the shape of this offer says more about it than the headline number does.

Telesat is building a constellation of 225 low orbit satellites, yet it cannot pay for the geostationary fleet it launched years ago. Term lenders proposed a C$2.3 billion deal, roughly US$1.63 billion, according to the Wall Street Journal, citing people familiar with the matter. The lenders would help raise a mix of new equity and debt to repay their loan. Existing shareholders would be invited to take part.

Telesat has filed nothing since 13 August and has not commented on the proposal. Management does say its advisers have spoken with lenders' advisers repeatedly over the past nine months. The reported offer is the first public sign of where those talks have landed.

The old business is called GEO, short for geostationary, and it owes the debt that falls due. The new low orbit business, Lightspeed, has its own money. In its August filing with the SEC, Telesat says Lightspeed has a segregated funding source. It adds that repayment of the credit facilities does not extend beyond the GEO guarantors, the group companies that back the debt. The lenders are pricing that wall.

The numbers show how tight the fit is. The term loan of C$1,875 million and the 2026 secured notes of C$549 million both mature in December. Together that is C$2.42 billion at June 30 balance sheet values.

A C$2.3 billion package is therefore about C$124 million, or 5%, below that wall, even if every dollar went to repayment. Against the C$3.05 billion of total GEO debt running to October 2027, it covers about 75%. That is three quarters of all GEO debt, yet still short of the December piece alone.

Cash does not close the gap. The group held C$383 million at the end of June, but only C$161 million sat inside GEO. That is about 7% of the December amount.

The company says consolidated cash alone is not expected to meet the GEO maturities. It also carries a going concern warning, a formal doubt that the company can keep operating without a fix. That warning relates solely to those maturities. For 2026 it guides GEO revenue of C$300 to 320 million and adjusted EBITDA of C$210 to 230 million before refinancing costs. EBITDA is earnings before interest, taxes, depreciation and amortization, so that range shows what the old fleet can still earn.

The December date matters because the old fleet is shrinking. In the first half of 2026 GEO revenue fell 26% to C$164 million. Adjusted EBITDA fell 39% to C$98 million, with utilization, the share of satellite capacity in use, at 60% as broadcast customers declined to renew.

Interest expense for the group was C$100 million in the six months. Those satellites cannot carry C$3 billion of debt on that earnings path, and the lenders know it.

The structure matters more than the size. The term loan and both secured note series are secured on substantially all of Telesat's assets except those of Lightspeed. Lenders to a falling business with a fenced-off growth asset cannot recover par, meaning full face value, from the business itself.

They can recover it only from new money. New money will come only if someone is paid for taking GEO risk. Inviting equity holders in points to equity as the plug.

Lightspeed's money is not theirs to reach. Telesat says the constellation is fully funded through equity, loans from the Government of Canada and the Government of Quebec, vendor financing and milestone payments. Those payments come from a 15 year Arctic military contract with Canada's Defence Investment Agency.

That contract was announced on 4 August and is worth C$2.7 billion including options. It carries C$2.0 billion of milestone payments between the third quarter of 2026 and the fourth quarter of 2028.

Those payments are the largest cash inflow in the group that the GEO lenders cannot touch. They are meant to expand the constellation from 156 to 225 satellites, with commercial service planned for around the end of the first quarter of 2028. An extension that leaves C$3 billion outstanding on a business that earned C$98 million of EBITDA in half a year buys nothing. The lenders have therefore proposed a partial paydown funded by fresh capital.

The Lightspeed warrants sit on the other side of the same wall. A warrant is a right to buy equity, and these equal 11.87% of Lightspeed's equity. They were granted to the Government of Canada and the Government of Quebec as consideration for making available C$2.54 billion of loan facilities.

They become exercisable on 15 November 2026, five to six weeks before the maturity. But they belong to Ottawa and Quebec, not to the term lenders.

Telesat carried the warrants at C$1.32 billion on 30 June, against C$832 million at the end of 2025. It booked a C$488 million first half loss on the change in fair value of financial instruments, against C$47 million a year earlier. The market has marked the governments' Lightspeed stake sharply higher this year.

Telesat says it is highly unlikely the governments will exercise within twelve months. The underlying units are illiquid and limit further monetization.

The rescue is not a trade between two halves of one balance sheet. The upside in Lightspeed is already allocated to the state lenders and to Telesat's shareholders. The GEO creditors hold only a falling asset with a December date.

Telesat is also borrowing at the edge of the structure. A new US$120 million four year loan sits at a GEO subsidiary that is not a guarantor under the existing term loan and notes. A shareholder invited to the equity portion is being asked to fund a business whose EBITDA fell 39% with the fleet at 60% utilization. Broadcasters on that capacity depend on service continuing through the refinancing.

The test comes before the maturity. Ottawa and Quebec can exercise on 15 November, but Telesat expects them not to, so Lightspeed ownership should not move first. A binding refinancing announced before the December maturity that repays part of the GEO loan with new equity and debt would show the lenders have priced the wall. Without one, December arrives with the GEO company still holding C$161 million of cash.