Telesat’s corporate headquarters Ottawa.FRED CHARTRAND/The Canadian Press
Improving conditions in capital markets suggest initial public offerings could be making a comeback. But one potential Canadian IPO investors likely won't see any time soon is satellite operator Telesat Holdings Inc.
Last July, one of Telesat's two shareholders, Public Sector Pension Plan Investment Board – the fund that manages federal government pension money – informed its partner, Loral Space & Communiications, that it was exercising its right under their shareholders' agreement to require Telesat to go public. (That closely followed a filing last May by Intelsat Global Holdings SA to go public.) As of mid-November, when Loral filed its third-quarter report, the Telesat IPO file was still active.
But according to a U.S. securities filing by Loral last Friday, PSP "subsequently withdrew" its notice, meaning a Telesat IPO is off the table. A PSP spokesman declined comment. (Meanwhile, the Intelsat IPO remains in the pipeline)
This was no less than the third attempt by Montreal-based PSP to cash in on its 36 per cent stake in Telesat, a strong performer since BCE Inc. sold the business in 2007. But the two shareholders have not been able to see eye to eye on how, or when, to divest of the company. Loral, controlled by New York-based investor Mark Rachesky, stated last year that while it would support PSP's request for an IPO, it had no interest in selling its stake.
Tensions have built up between the two partners, particularly a 2010-11 strategic review that resulted in an abandoned sale process. Sources have told the Globe that PSP was pleased by the prices offered but Loral balked at the tax hit it would sustain (PSP is exempt from paying taxes). Instead, the shareholders settled on recapitalizing Telesat, increasing debt by $500-million and taking a $705-million dividend out of the company.
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Sean Silcoff