E.D. Virginia Chapter 11: Intelsat S.A.
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All Documents Can Be Accessed by Clicking the Case Title Immediately Above
CASE DETAILS
Link: Petition
On May 14, 2020 (the “Petition Date”), Intelsat S.A. and thirty-four of its affiliates (collectively, the “Debtors,” and, together with their non-Debtor affiliates, the “Company”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia. The Debtors are represented by Kirkland & Ellis LLP and Kutak Rock LLP. The case has been assigned to the Honorable Keith L. Phillips. A hearing on the Debtors’ first day motions was held on May 15, 2020.
ABOUT THE DEBTORS
Link: Affidavit in Support
The Company maintains the world’s largest satellite fleet and connectivity infrastructure. The Company’s history began in the early 1960s, when it was created through an international treaty to institute a global communications system of satellites, connecting the world via telegraph, telephone, radio, and television. The Company has since played a part in some of the world’s most memorable moments, from broadcasting the first moonwalk, to providing the hotline between the Pentagon and Kremlin during the Cold War, to broadcasting World Cups, Olympic Games, and Super Bowls to billions of people worldwide. Today, the Company operates a fleet of over 50 satellites, covering 99% of the earth’s populated regions. The Company also operates over a significant terrestrial network which completes the system’s connectivity worldwide.
The Company has approximately 1,200 employees, and maintains its corporate administrative headquarters in Tysons Corner, Virginia, with local sales and marketing support offices in sixteen countries around the world.
The Debtors state that the satellite communications industry is competitive, challenging, and capital intensive, and that the market often suffers from overcapacity, both from satellite companies launching additional satellites and from ever-improving technology increasing deliverable capacity to end users and lowering costs. Thus, despite increasing demand for satellite and other communications services, increasing supply and intense competition have challenged the Company’s ability to grow revenues. In addition, the Company has made and continues to make necessary long-term capital expenditures – investing in new satellites and other technologies to compete effectively against other providers – in anticipation of end-user demand, years before those investments are able to generate revenue.
The Debtors have commenced these cases to efficiently access capital and engage with stakeholders through a chapter 11 process. The Debtors require this capital to meet two unexpected external challenges that have recently arisen. Specifically, the Debtors require sufficient capital to comply with the FCC’s February 28, 2020 order to “clear” operations from the 3700-4000 MHz radio frequency spectrum and obtain up to $4.87 billion in accelerated relocation payments, and to address the significant reduction in revenue and cash flow associated with the ongoing COVID-19 pandemic.
FINANCIAL CONDITION
The Company carries financial leverage of almost $15 billion in debt, supported in 2019 by $2.1 billion in annual revenues and approximately $1.5 billion in annual AEBITDA. As of the Petition Date, the Debtors had approximately $14.8 billion in total outstanding funded debt obligations, both secured and unsecured, with annual debt service payments totaling approximately $1.13 billion.
DIP/CASH COLLATERAL MOTION
Links: Cash Collateral Motion Budget
After considering five preliminary proposals for debtor-in-possession financing from third-party financial institutions, and multiple proposals from certain of the Debtors’ prepetition creditors, the Debtors have determined that a $1 billion superpriority senior secured priming multi-draw term loan credit facility, proposed by an ad hoc group of holders of approximately half of the Debtors’ secured term loan and secured notes, is the best option available. The Debtors believe this financing will provide the capital to pay the clearing costs and maintain an adequate cash balance given the capital-intensive nature of their businesses, to operate their businesses through the term of these cases, to cover the clearing costs and contingencies needed to comply with the FCC’s order, and to send an important signal to the Debtors’ customers and vendors that the Debtors have the capital to undertake new projects and service new business from existing and new customers, despite the filing.
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SUMMARY OF FIRST DAY MOTIONS (Excel chart)