Canada’s new $2.3 billion Arctic military communications contract will fund an expansion of Telesat’s next-generation satellite network, but it does not directly resolve the US$1.7 billion debt maturity approaching at the company’s separate legacy satellite subsidiary.
The Defence Investment Agency awarded the contract to Telesat LEO ULC, the subsidiary developing the Lightspeed low-Earth-orbit network. The debt coming due in December was issued by Telesat GEO Inc., formerly Telesat Canada, whose creditors are challenging a 2025 transfer of Lightspeed equity away from the GEO borrower.
The Government of Canada announced the initial $2.3 billion award on August 4. Two option periods worth approximately $214 million and $218 million could lift the total value to $2.73 billion.
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Telesat said the arrangement represents the largest contract in its history. It will increase the planned Lightspeed constellation from 156 satellites to 225 by adding 69 fully funded satellites, expanding network capacity by 44%.
The contract covers as many as 15 years of service, including the option periods. Service is expected to begin in 2028, while government payments will be tied to project milestones beginning in the third quarter of 2026.
It is worth noting that the company said it is not structured as an immediate $2.3 billion cash payment and will be done through milestones.
The federal government said the procurement could create or maintain 2,600 jobs annually and contribute $335 million per year to Canadian gross domestic product over approximately seven years. The system will provide secure Military Ka-band connectivity for Canadian Armed Forces operations in the Arctic and other high-latitude regions.
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The contract arrives as Telesat attempts to refinance debt supported by a shrinking geostationary satellite business. Its March-quarter SEC filing classified approximately $2.4 billion of GEO debt as a current liability because of the December 2026 maturities. The filing said the refinancing requirement created material uncertainty and substantial doubt about the GEO unit’s ability to meet its obligations.
Telesat ended March with $522.7 million in cash and short-term investments. First-quarter revenue fell 25% year over year to $87.1 million, while adjusted EBITDA declined 48% to $35.1 million. The company reported a $150.9 million net loss and invested $171.0 million in Lightspeed during the quarter.
The creditor litigation concerns Telesat’s September 2025 distribution of 62% of the equity in its Lightspeed business to Telesat LEO CanHold Corp., an affiliate outside the debt guarantor group.
Wilmington Savings Fund Society, acting as administrative agent for lenders, alleges the transfer breached loan agreements and removed valuable assets from the pool available to GEO creditors. The complaints seek to reverse the transaction and recover damages.
Telesat has called the lawsuits “without merit,” saying the equity distribution followed a robust governance process and complied with its debt agreements and applicable law.
The New York case remains in discovery in the US District Court for the Southern District of New York.
Investors nevertheless treated the military award as a major commercial milestone. Telesat shares jumped 36.3% to close at US$54.75 on August 4.
