Intelsat creditors attack bankruptcy plan, say board conflicted
(Reuters) - Intelsat SA is facing increasing opposition to its proposed reorganization plan as certain creditors and shareholders accuse the satellite communications provider of caving to the demands of one favored creditor group and failing to conduct an impartial probe into pre-bankruptcy transactions.
In court papers filed on Monday, a group of noteholders urged U.S. Bankruptcy Judge Keith Phillips in Richmond, Virginia to reject the plan, saying it improperly shifts most of the company’s value to one set of creditors and institutional shareholders, including hedge fund Appaloosa, at the expense of others.
The plan, if approved, would cut Intelsat’s debt from $15 billion to $7 billion and hand control of the company over to unsecured bondholders of subsidiary Intelsat Jackson Holdings SA.
Intelsat filed for bankruptcy in May 2020 to restructure its debt as it prepared to transfer some of its C-band spectrum to the U.S. Federal Communications Commission. In exchange, Intelsat is receiving about $4.9 billion.
The noteholder group also accused directors that signed off on the plan of being conflicted and settling certain claims to protect themselves against potential liability arising from pre-bankruptcy transactions, including restructuring deals, decisions relating to the FCC payments and accusations of insider trading. The noteholders allege that the directors agreed to the "favored" creditor group's demands after it threatened to sue them personally.
“The [Intelsat] Board was scared into submission,” the group said.
Intelsat competitor SES Americom Inc, which says Intelsat owes it $421 million under an agreement to split the FCC payments, also filed an objection. SES argues that the U.S. unit with which it signed the agreement is central to the company’s overall operations and is entitled to far more than the 4.5% of the FCC payments that it's set to receive under the plan. A larger chunk of the FCC payments would result in higher payouts to SES, which says it is currently in line for pennies on the dollar.
SES echoed the noteholder group’s allegations that the directors making decisions about the plan were conflicted.
A small group of equity holders, whose interests will be wiped out under the plan, objected to the plan, saying it ignores opportunities to bring in more value. The group also challenged the plan’s proposed legal protections for officers and directors.
A hearing on the plan is set to begin on Dec. 2.
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 noteholder group: Kristopher Hansen, Daniel Fliman,
Sayan Bhattacharyya, Patrick Petrocelli and Isaac Sasson of Stroock & Stroock & Lavan; Duane Loft of Boies Schiller Flexner; and Jason Gold and Dylan Trache of Nelson Mullins Riley & Scarborough
For SES Americom: Orin Snyder, Michael Rosenthal, Brian Lutz, and Christopher Belelieu of Gibson, Dunn & Crutcher; and Dennis Lewandowski of Kaufman & Canoles
For the equity group: Harold Kaplan, Mark Hebbeln and Susan Poll Klaessy of Foley & Lardner; and David Kovel of Kirby McInerney
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Intelsat judge aims to delay key bankruptcy plan hearing
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