A subsidiary of Telesat Canada has initiated legal proceedings in New York federal court, filing two motions aimed at dismissing a lawsuit that arose from a significant asset transfer conducted by the satellite company in 2025. The motions are based on jurisdictional arguments, contending that the matter should be adjudicated in Canada rather than the United States.
Background of the Asset Transfer and Legal Actions
In September 2025, Telesat Canada executed a transfer of low-earth-orbit assets out of a collateral package that secured its notes and loans. This move prompted bondholders to file lawsuits in January 2026, with cases brought before both the Ontario Superior Court and a New York state court. The bondholders allege that the transfers effectively removed valuable assets from their reach, and they are demanding a reversal of these actions to protect their financial interests.
Arguments for Dismissal in U.S. Court
Telesat LEO CanHold Corp., an affiliate of Telesat Canada that received a 62 per cent stake in the Lightspeed unit as part of the transfer, has asserted in a March 27 filing that the dispute is inherently Canadian. The filing states, "This concerns a Canadian corporation's transfer of equity in another Canadian entity to a third Canadian corporation." It further emphasizes, "If this sounds like a dispute that should be pursued in Canada (if at all), that's because it is," highlighting the jurisdictional basis for seeking dismissal.
In a second motion filed on the same day, both CanHold and Telesat Canada are seeking the dismissal or a stay of a specific count in the U.S. lawsuit. This count involves an "intentional fraudulent conveyance claim" under Ontario law, which is also being addressed in the parallel Ontario court proceedings. The companies argue that since the same allegation is being litigated in Canada, it should not proceed concurrently in the U.S., to avoid conflicting rulings and unnecessary legal complexity.
Impact on Telesat Canada's Stake and Operations
Following the asset transfer, Telesat Canada retained a 38 per cent stake in the unit but relinquished control over the LEO network. This strategic shift has significant implications for the company's operational dynamics and financial structure. Additionally, Telesat Canada has secured substantial debt financing from the Canadian government to support the development and expansion of its orbital operations, underscoring the high stakes involved in this legal and financial maneuvering.
A representative for the creditors involved in the lawsuit declined to comment on the ongoing proceedings, maintaining a stance of confidentiality as the case unfolds. The outcome of these motions could set a precedent for how cross-border legal disputes involving asset transfers are handled, particularly in the context of international satellite and telecommunications industries.
