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(Bloomberg) — Canadian satellite operator Telesat Corp. is preparing to kick off talks with lenders over at least $1.7 billion in debt that currently trades at distressed levels, its chief executive officer said.

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“We will need to go back to the market and refinance,” Dan Goldberg said in an interview. “It’s something that we’re going to focus on and it’s something that we want to get done.”

Telesat has about $1.7 billion in debt maturing in December 2026 across a floating-rate term loan and senior secured notes as of Sept. 30, according to a filing this month.

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Telesat creditors holding more than 75% of the term loan and about 35% of its secured notes sought talks about how the company will deal with the debt, Bloomberg reported in July. The group formed out of concern over Telesat’s plans to spend billions on new satellites that won’t generate cash for years and are held in an unrestricted subsidiary, which could put it out of reach of existing creditors.

Telesat’s $387 million of 5.625% first lien bonds due 2026 were quoted Monday at around 51 cents on the dollar, according to Bloomberg indicative prices. An unsecured bond maturing in 2027 with $221 million outstanding was quoted last week at just 31 cents on the dollar, another signal of worry about the balance sheet. 

Ottawa-based Telesat wants to invest $4.6 billion to build a fleet of nearly 200 spacecraft called Lightspeed to blanket the Earth in high-speed, low-latency internet and compete with Elon Musk’s Starlink — owned by Space Exploration Technologies Corp. — as well as Amazon.com Inc.’s planned fleet, dubbed Project Kuiper.

The low Earth orbit or LEO fleet, with a planned commercial launch in 2027, is a break from Telesat’s traditional but shrinking business, which is based on 15 geostationary satellites that beam internet and broadcast signals to fixed points from 36,000 kilometers (about 22,400 miles) away. The company was founded by the Canadian government in 1969.

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Goldberg said Telesat can respond to lenders who “wanted to engage with us on refinancing plans” because now it has secured loans worth C$2.54 billion ($1.8 billion) from the governments of Canada and Quebec to help fund the LEO project. He declined to answer follow-up questions about the pending process.

Anxiety among Telesat’s legacy debt holders “is understandable, given they’re owed almost C$3 billion over the same period in which about C$4 billion will be invested in Lightspeed’s build,” Bloomberg Intelligence senior credit analyst Philip Brendel wrote earlier this month.

The Musk Factor

Meanwhile, Musk’s SpaceX has launched more than 6,000 Starlink satellites with its own reusable rockets, dominating the newly popular range for providing broadband internet access to remote locations, cargo ships and planes. The closely held company recently had discussions with insiders that may boost its valuation to about $255 billion, Bloomberg reported this month, compared with Telesat’s $660 million market capitalization. 

Goldberg said that despite Musk’s head start, he’s confident customers will want to diversify their providers, comparing it to cloud computing and storage.

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“No one provider is going to capture all of the requirements. And I think we’ll find ways to work with SpaceX and Starlink in terms of interoperability of networks,” he said. 

Telesat will also rely on SpaceX rockets to carry its Lightspeed satellites into orbit in a contract worth hundreds of millions of dollars.

Rising defense spending will boost Telesat in Canada, Goldberg added. US President-elect Donald Trump — who has hired Musk as a government efficiency czar — has repeatedly bashed Canada and other North Atlantic Treaty Organization members that spend less than 2% of their gross domestic product on defense.

—With assistance from Nina Trentmann and Esteban Duarte.

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