Intelsat Chapter 11 Exit OK'd; Early 2022 Emergence Eyed
In a hearing delayed nearly three hours by last-minute negotiations between Intelsat and its creditors, U.S. Bankruptcy Judge Keith Phillips of Richmond approved the company's plan for emergence from Chapter 11 bankruptcy. The unanimous backing of the plan by creditors, given the competing claims, is "a remarkable achievement," he said. Intelsat said the actual emergence will be early next year. Our news bulletin is here.
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Intelsat will more than halve its debt -- from $16 billion to $7 billion -- and be a privately held company. It said it will be able to cut its debt further when it receives its $4.9 billion in C-band accelerated relocation payments. It said the $1.2 billion approved by the FCC for its Phase I clearing (see 2111120060) should come in January. Intelsat bankruptcy lawyer Steven Serajeddini of Kirkland and Ellis said the company will seek OK in January for its $7.87 billion in loans and notes making up its exit financing.
Still to be resolved is SES' litigation over alleged violation of the C-Band Alliance agreement (see 2007140067). An Intelsat spokesperson emailed the SES claim is set for a February hearing and "will not prevent, delay, or otherwise impact Intelsat’s ability to emerge from the process and effectuate our confirmed plan."
"With a strengthened balance sheet, strong operating model, and unparalleled global orbital and spectrum rights, scale, and partnerships, we will be better positioned to advance our strategic objectives, accelerate our growth trajectory, and fuel the success of our customers and other key stakeholders," CEO Stephen Spengler said. "Our goals include building the world’s first global 5G satellite-based, software-defined, unified network."
The hearing's postponement let Intelsat resolve outstanding issues, including some changes to recovery amounts and to the makeup of the New Intelsat board, Serajeddini said. He said an amended plan reflecting those changes will be filed with the court for official signoff. SES outside counsel Michael Rosenthal of Gibson Dunn said it had concerns about how the changed recovery amounts might affect its negotiated settlement with Intelsat. Serajeddini said it will confer with SES to ensure there are no remaining issues as it circulates the revised plan.
Left on the table was a DOJ objection on the 2021 management incentive plan (MIP). U.S. Bankruptcy Trustee Benjamin King said the incentive plan fails to show it's actually incentivizing management, such as through targets the company needs to hit, rather than just rewarding them for remaining there through the bankruptcy.
With Spengler retiring after the company emerges from bankruptcy, the payout to him is more akin to a severance payment than incentivization, King said. Phillips said the MIP design and structure are reasonable and noted wide support by creditors as he overruled the objection. The consensual plan is the best route for Intelsat to emerge from bankruptcy and focus on its business and eases the path to obtain its C-band clearing funds, the judge said.