- Telesat has readily admitted that its GEO business is dying, and it’s pivoting to LEO
- The Canadian company restructured its business to shelter its LEO assets from creditors
- Now, those creditors are suing, claiming that Telesat is playing a “shell game”
An executive from the Canadian satellite operator Telesat recently told Fierce Network the company is moving away from its long-time geosynchronous satellite (GEO) business and pivoting to its new low-Earth-orbit (LEO) business, which it calls “Lightspeed.”
Telesat also did some corporate restructuring to place most of its valuable assets out of the reach of creditors for its fading GEO business.
Now, a group of those creditors is suing Telesat, claiming the company is trying to avoid paying $1.7 billion in debt maturing in December 2026 and nearly $450 million more debt maturing in 2027.
They claim that Telesat has, for years, rebuffed their efforts to work out a debt repayment solution. Instead, on September 12, 2025, Telesat distributed 62% of the equity of its LEO business to an indirect subsidiary, out of the creditors’ reach.
Creditors and their claims
“Rather than negotiate in good faith with term lenders to restructure in a manner that preserved creditor protections while ensuring the long-term viability of the company, Telesat devised a scheme to unlawfully move the value of the LEO business away from its creditors,” states the complaint.
The creditors claim Telesat’s financial moves amount to nothing more than a “financial shell game,” and there was no legitimate reason to transfer the “crown jewel assets” of LEO away from the parent company for zero consideration.
The creditors want the court to declare the transfer of funds a “fraudulent conveyance,” void the transaction, and award them compensatory damages.
In response, Telesat issued a short press release, confirming that certain creditors holding portions of the company’s legacy GEO debt have filed lawsuits in both New York and Ontario regarding the equity distribution in September 2025 of the Telesat Lightspeed business.
“The lawsuits, filed at the direction of a group of distressed debt hedge funds, are without merit,” states Telesat. “The equity distribution at issue followed a robust governance process and was accomplished in strict accordance with relevant debt agreements and applicable law. Telesat intends to defend itself vigorously. Telesat and its stakeholders are firmly committed to supporting the company’s customers, advancing the Telesat Lightspeed program and creating long-term value.”
What is the legal analysis?
Fierce reached out to Catherine Cervone, a bankruptcy lawyer with Phillips Lytle in Buffalo, N.Y., for her view on the validity of the creditors’ case.
She said Phillips Lytle can’t opine on Canadian law, but generally, many states, including New York, provide creditors with a cause of action to avoid fraudulent conveyances or transfers of assets by a debtor that are either intended to hinder a creditor’s ability to obtain repayment, or are made by a debtor in exchange for less than fair value.
“Under state law, such as the Uniform Voidable Transactions Act adopted by New York State, this cause of action is intended to remedy harm caused to a particular creditor by a debtor’s moving assets out of their reach,” said Cervone.
But she did caution that a fraudulent conveyance claim, like the one asserted by the Telestat creditors, differs from a bankruptcy case.