Intelsat bankruptcy judge denies equity call for examiner

3 minute read

Signage is seen at the United States Bankruptcy Court for the Southern District of New York in Manhattan, New York City, U.S., August 24, 2020. REUTERS/Andrew Kelly

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  • Equity group says Intelsat ignored potential mismanagement claims
  • Judge says too little time to conduct investigation

(Reuters) - The judge overseeing satellite operator Intelsat SA’s bankruptcy has rejected a request by a group of equity holders to bring in an independent examiner to investigate claims of potential mismanagement and other ways to bring in more money for creditors that they say the company has ignored.

U.S. Bankruptcy Judge Keith Phillips in Richmond, Virginia issued his ruling during a virtual hearing on Wednesday, about 40 days before he is set to consider Intelsat’s proposed reorganization plan for approval. The judge said he did not believe there was sufficient time before the confirmation hearing for an examiner to conduct a meaningful investigation.

Under the plan, Intelsat, represented by Kirkland & Ellis, would cut its debt from $15 billion to $7 billion and hand control of the company over to unsecured bondholders of subsidiary Intelsat Jackson Holdings SA. The plan is opposed by another group of bondholders.

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The equity group, which represents about 2% of Intelsat SA shareholders, had argued that the plan is improperly designed solely for the benefit of the Intelsat affiliates’ creditors, rather than creditors and shareholders of the parent entity. The group, represented by Kirby McInerney and Foley & Lardner, said an examiner should be brought in to investigate tax benefits and potential mismanagement claims against executives, among other areas of potential value, that could boost recoveries to creditors of Intelsat SA.

The company, however, said it was too late in the game to bring an examiner. Phillips agreed, saying he didn’t think an examiner would have enough time to get up to speed before the Nov. 8 plan confirmation hearing.

The judge left the door open, however, for the equity group to revisit the motion if he denies Intelsat’s request to confirm its reorganization plan in November.

“I don’t know what’s going to happen at the confirmation hearing,” he said.

A lawyer for the equity group, David Kovel, declined to comment on the judge’s ruling.

Intelsat filed for bankruptcy in May 2020, saying it needed to restructure as it prepared to transfer some of its so-called C-band spectrum to the U.S. Federal Communications Commission, which planned to use the spectrum to build out a 5G network. In exchange, Intelsat is receiving about $4.9 billion from the FCC.

The case is In re Intelsat SA, U.S. Bankruptcy Court, Eastern District of Virginia, No. 20-32299.

For Intelsat: Edward Sassower, Steven Serajeddini and Aparna Yenamandra of Kirkland & Ellis; and Michael Condyles, Peter Barrett, Jeremy Williams and Brian Richardson of Kutak Rock

For the equity group: Harold Kaplan, Mark Hebbeln and Susan Poll Klaessy of Foley & Lardner; and David Kovel of Kirby McInerney

Read more:

Intelsat, equity holders square off over bankruptcy examiner request

A year into bankruptcy, Intelsat faces creditor effort to seize control of restructuring

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Reporting by Maria Chutchian

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Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.