John is better qualified than I to use words like “bubble” or comparisons to Enron. But —

Intelsat Ltd., the satellite provider to the US military, plans the biggest US junk bond sale in 16 years as it takes on $3.2 billion of debt in a leveraged buyout of PanAmSat Holding Corp. The Bermuda-based company said it may sell $4.2 billion of bonds to refinance debt and help fund the transaction.

The company is tapping the market as borrowing costs for high- risk, high-yield borrowers are close to the lowest in three months relative to US Treasuries. The bond sale may come in the next six months.

The combined company may have debt exceeding $11 billion, more than ten times a widely used measure of cash flow, said Dennis Saputo, a senior vice president at Moodys Investors Service. At that level, Intelsat would be bordering on insolvency if not insolvent after such a deal, he said.

Thats deep, deep junk, New York-based Saputo said in an interview. I’d be surprised if theyll be able to fund this thing with all debt, but the capital markets are frothy.

Frothy? Do these dudes write all their copy in Starbucks?

In addition to the debt, Intelsat will pay $3.2 billion in cash for PanAmSat, whose customers include MTV and CNN. The company has arranged $7 billion in loans.