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Intelsat overcomes numerous objections to secure bankruptcy plan

Intelsat SA, the satellite operator that has been in bankruptcy for more than 18 months, secured court approval for its restructuring plan after a trial and last-minute settlement that centered on who will get nearly $5 billion in future payments from the Federal Communications Commission.

The plan, which originally faced numerous objections but now has broad creditor support, will cut its debt load from about $16 billion and outlines about $7.9 billion in new borrowings for Intelsat to exit bankruptcy. The company negotiated 11th hour settlements with its hold-out constituents, notably the ad hoc convertible note holders, after a week-long trial that saw both sides arguing over which part of the capital structure should receive the FCC cash.

The satellite firm filed for bankruptcy in May 2020 to trim its debt as part of a broader turnaround that hinges on transferring its so-called C-Band spectrum for use by the FCC. The commission has promised Intelsat that it will receive about $4.9 billion in exchange for hitting certain milestones to transfer the airwaves that can be used by mobile phone companies to provide 5G services.

The convertible note creditors had argued that because their debt was located at the parent entity, they were entitled to the FCC payments instead of the Intelsat Jackson subsidiary, which will receive the payments under the bankruptcy plan and whose creditors will own essentially all of the equity in the new company.

Intelsat agreed to give the ad hoc noteholders an additional $25 million in cash, as well as three board of director appointments, to withdraw their objections to plan. The creditors were previously projected to get a 6.9% recovery on their roughly $400 million of notes, according to the disclosure statement.

The bankruptcy plan follows months of negotiations in order to resolve a myriad of objections across the capital structure, as well as from SES Americom and the U.S. Trustee, the Department of Justice’s bankruptcy watchdog.

Judge Keith Phillips said he would approve a revised version of the bankruptcy plan accounting for the ad hoc convertible group settlement, as well as other changes, in a hearing Thursday. The U.S. Trustee objected to aspects of the company’s management incentive plan, but that was overruled.

The bankruptcy plan is the most “viable and efficient” way forward for Intelsat, Phillips said in the hearing. Given the complexity of the case, Phillips said he was “somewhat skeptical about how this would all play out” at the start of the trial, but “pleased” with the outcome. Bloomberg Quint

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