Canadian Starlink rival Telesat could default on US$1.71B loan in less than a month — what it could cost Canadian taxpayers, pensioners and investors

That raises a troubling question for Canadians: If Telesat can’t meet its financial obligations, who stands to lose? The answer depends on whether you’re a taxpayer, a pension plan member or an investor who bought into the promise of a Canadian satellite powerhouse.

What’s due Dec. 6 — and why might Telesat miss it?

Why would the federal government invest in Telesat as an alternative to Musk’s Starlink if Telesat was in debt? Because the debt sits with Telesat’s older geostationary (GEO) satellite business, not its new Lightspeed network.

As reported in The Globe and Mail about US$1.71 billion comes due on Dec. 6, with another US$438 million maturing in 2027 — but most of this is due to the GEO line of business. Still, this debt is an issue, given that Telesat’s recent filings show that its cash flows and resources “are not expected to be sufficient” to meet those debt maturities.

Space-industry outlet Payload reports Telesat GEO holds about CA$286.7 million in cash against roughly CA$3 billion in debt due by October 2027.

Lenders, including U.S. funds Silver Point Capital, GoldenTree Asset Management and Sound Point Capital Management, tabled a rescue plan in October. According to the Financial Times, existing shareholders would buy CA$1.7 billion in new shares, while lenders would add CA$1.5 billion in new loans with creditors getting the first claim on Telesat’s Lightspeed stake if the company can’t pay.

As of early November, no deal has been announced.

This is significant as not all industry analysts are convinced default is a long-shot. According to a September Globe and Mail interview with David McFadgen, an analyst with ATB Cormark Capital Markets a default “is not an unlikely event.”

There is one Hail Mary left for Telesat. According to a 1991 federal law, Canadian insolvency law doesn’t apply to a company if that firm can’t be wound up without an Act of Parliament; however, this provision has never been tested in court.

Could a Telesat default hurt federal public-service pensions?

Given the federal government’s investment in Telesat, many pre- and post-retirees are wondering if the investment — and potential default — could hurt federal public-service pension plans. For plan members, the short answer is no.

The Public Sector Pension Investment Board (PSP Investments) is a Crown corporation that invests contributions for the pension plans of the federal public service, Canadian Armed Forces, RCMP and Reserve Force. As of March 31, 2026, PSP manages CA$320.6 billion in net assets; it’s owned a part of Telesat since 2007, and held about 36.7% of the company when Telesat went public.

PSP Investments manages and invests for defined pension plans, so the plan members receive retirement income based on their salary and years of service, not on how PSP’s investments perform. As a result, Ottawa carries the funding risk alone and has a legal obligation to pay member benefits.

For plan members, a bad Telesat bet wouldn’t shrink a retiree’s cheque; instead, if PSP’s returns fall short over time, taxpayers backfill the gap.

How much taxpayer money is tied to Telesat?

The question remains: How much of taxpayer money is tied to Telesat? Quite a bit.

Ottawa has made a multibillion-dollar commitment to Telesat’s Lightspeed satellite network, but not all that money comes in the form of loans. In September 2024, the federal government agreed to lend Telesat $2.14 billion, with Quebec providing another $400 million. As part of the deal, Ottawa also secured warrants that could give it a 10% ownership stake in Lightspeed.

The federal government separately committed $600 million over 10 years to purchase satellite capacity for rural internet service. Plus, Telesat secured an initial $2.3-billion federal defence contract, in August 2026, to provide satellite communications in the Arctic. Together, those agreements represent roughly $5.4 billion in government loans and contracts, although not all the money has been paid out.

Complications due to creditor concerns

But there’s a complication. Telesat is fighting creditors who allege the company moved 62% of its ownership in Lightspeed beyond their reach in 2025. The dispute centres on collateral — the assets lenders can claim if a borrower fails to repay its debts. Creditors argue the restructuring put much of Telesat’s potentially valuable satellite business outside the pool of assets securing their loans.

Telesat disputes the allegations and says it will defend its position in court. The outcome matters because the company faces a major debt repayment deadline before Lightspeed is expected to begin commercial operations.

For Canadian taxpayers, the distinction is important. A default on Telesat’s existing debt would not automatically put Ottawa’s loans or service contracts at risk. But if the company’s financial troubles threaten Lightspeed’s completion, billions in public financing — and the government’s plans to use the network for rural internet and Arctic communications — could face greater uncertainty.

What should Canadians who own TSAT shares know?

If you hold Telesat (TSX:TSAT) in a tax-free savings account (TFSA) or registered retirement savings plan (RRSP), the lender proposal is the part to watch closely. A plan that asks current shareholders to fund CA$1.7 billion in new equity could be a signal to committed investors that it’s time to buy again, or watch your stake get diluted.

A loss inside a registered account also carries an extra sting: You can’t claim a capital loss in a TFSA or RRSP to offset gains elsewhere.