March 28, 2020 – OneWeb Global Limited and 18 affiliated Debtors (“OneWeb” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case number 20-22437. The Debtors, the developers of a global satellite communications network, are represented by Dennis F. Dunne of Milbank LLP. Further board-authorized engagements include (i) FTI Consulting, Inc. as financial advisors, (ii) Guggenheim Securities, LLC as investment bankers and (iii) Omni Agent Solutions as claims agent.
The Debtors, who have launched approximately 70 of what was supposed to be an initial phase of 648 low earth orbit satellites (ultimately to be a "constellation" of 2000) have cited the impact of COVID-19 on the availability of further capital as the key factor in their need to seek Chapter 11 shelter. The decision of existing lenders and then prospective bridge financing lenders to apparently turn their backs on the Debtors (on March 12th and 21st, respectively) comes only a year after the Debtors' touted a $1.25bn fund raising as making their satellite services "inevitable" and ensuring that they would have "global coverage first" in a much publicized "space race" with Jeff Bezos and Elon Musk.
The Debtors’ lead petition notes between 1,000 and 5,000 creditors; estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Arianespace ($238.1mn AP trade debt), (ii) Qualcomm Technologies ($8.0mn AP trade debt) and (iii) Deloitte Touche Tohmatsu Ltd ($6.8mn professional services debt). Each of McDermott Will & Emery LLP ($547k) and Shearman & Sterling ($129k) feature on the Debtors' list of top 30 unsecured creditors.
In a press release announcing the filing, the Debtors advised that: “The Company intends to use these proceedings to pursue a sale of its business in order to maximize the value of the company. Since the beginning of the year, OneWeb had been engaged in advanced negotiations regarding investment that would fully fund the Company through its deployment and commercial launch. While the Company was close to obtaining financing, the process did not progress because of the financial impact and market turbulence related to the spread of COVID-19."
Adrian Steckel, the Debtors’ Chief Executive Officer of OneWeb, added, “OneWeb has been building a truly global communications network to provide high-speed low latency broadband everywhere. Our current situation is a consequence of the economic impact of the COVID-19 crisis. Today is a difficult day for us at OneWeb. So many people have dedicated so much energy, effort, and passion to this company and our mission. Our hope is that this process will allow us to carve a path forward that leads to the completion of our mission, building on the years of effort and the billions of invested capital."
Objectives of the Chapter 11 Cases
Th Whayne Declaration (defined below) provides: "The Debtors have commenced these chapter 11 cases to provide them with the necessary breathing space to wait-out the current instability of the financial markets as they respond to COVID-19 pandemic and to adequately market and monetize their assets. The Debtors believe that conducting an open and competitive marketing process in the context of these chapter 11 cases, represents the best strategy to maximize value for their various stakeholders."
- Softbank Group Corp.: 37.41%
- Qualcomm Global Trading Pte.: 15.93%
- 1110 Ventures, LLC: 11.94%
- Airbus Group Proj B.V,: 8.50%
- Vieco Nominees Limited: 7.39%
- Indian Continent Investment Limited: 5.14%
Prepetition Capital Structure
- In 2015, OneWeb raised approximately $500.0mn in equity financing primarily from strategic investors, including certain entities affiliated with Airbus Group, Inc., Hughes Network Systems, LLC, EchoStar Corp., Intelsat Corporation, Qualcomm Incorporated and Virgin Group Ltd.
- In December 2016, OneWeb raised an additional $1.2bn consisting of a $1.0bn investment from SoftBank Group Corp. (“SoftBank”) and a $200.0mn investment from certain of its existing investors.
- As of the Petition Date, OWG had 6,897,734 ordinary shares and 606,061 preferred shares outstanding.
- July 2018 Note Purchase Agreement: On July 12, 2018, the Debtors entered into a note purchase agreement (the “Original NPA”) with SoftBank, as administrative and collateral agent. Between July 2018 and January 2019, the Debtors issued notes to SoftBank under the Original NPA in an aggregate principal amount of $408.0mn.
- March 2019 Note Purchase Agreement and Senior Secured Financing: On March 18, 2019, the Debtors entered into an Amended and Restated Note Purchase Agreement (the “A&R NPA”) with Softbank, Banco Azteca, S.A., Institución de Banca Múltiple, Airbus Group Proj B.V., Qualcomm Technologies, Inc. and The Government of the Republic of Rwanda as the initial purchasers (the “Purchasers”), Global Loan Agency Services Limited, as administrative agent, and GLAS Trust Corporation Limited, as collateral agent.
Between March 2019 and October 2019, the Debtors issued to the Purchasers 12.5% senior secured promissory notes in an aggregate principal amount of $1,560,621,949.30 (the “Senior Secured Financing”). As of the Petition Date, there was approximately $1,733,121,855.82 (principal plus accrued interest) outstanding under the Senior Secured Financing.
Events Leading to the Chapter 11 Filing
"This latest funding round, our largest to date, makes OneWeb’s service inevitable and is a vote of confidence from our core investor base in our business model and the OneWeb value proposition." So said the Debtors' CEO just over a year ago when commenting on the completion of a further $1.25bn round of funding that brought OneWeb's total financing haul to $3.4bn.
In a July 2019 interview with Bloomberg, Steckel continued to exude confidence in OneWeb’s ability to see off contenders in a space race against, amongst others, Elon Musk and the bottomless pockets of Jeff Bezos. “We’re going to have global coverage first, and then we’ll add more capacity to it." Promising to deliver satellites into orbit at a clip of 30 per month from Q4 2019, Steckel defended the venture’s economics as premised on OneWeb's ability to slash costs and manufacture satellites for about $1.0mn each. “But when you go to the next batch, it goes way below that, because we’ve amortized all the costs of the factory and whatnot,” said Steckel. “We will be able to broaden it and make it more affordable to everybody.”
So What Happened?
The Debtors make much of COVID-19 pandemic as the event that kicked shut the door to continued financing; with "anticipated funding opportunities…significantly and precipitously impacted by the COVID-19 pandemic and the resulting shuttering of the global economy." Indeed, it is undoubtedly COVID-19 that caused existing lenders and then potential bridge lenders to definitively turn their backs on the Debtors in Mid-March. Clearly, however, and notwithstanding the fairly fresh infusion of $1.25b in equity capital, the Debtors' liquidity issues preceded the arrival of COVID-19. The privately-held Debtors are not, however, effusive on the details as to how they ended up facing a "rapidly deteriorating liquidity position as the cost of building out the OneWeb System exhausted its existing equity and debt financing," with the story now essentially being: "We were always going to need more money, we had every reason to expect access to the capital markets…and COVID-19 has made that impossible." Cost over-runs; overly optimistic projections as to the number and timing of operational satellites; and management issues do not make it into OneWeb's mea culpa.
In a declaration in support of the Chapter 11 filing (the “Whayne Declaration”) [Docket No. 3], Thomas Whayne, the Debtors' Chief Financial Officer, detailed the events leading to OneWeb’s Chapter 11 filing. the Whayne Declaration states:
"OneWeb remains in the development stage of its business. Notably, the Company does not yet generate revenue. Historically, and throughout the various development stages of the OneWeb System, OneWeb has looked to its key equity and debt investors to provide liquidity for the next stage of its operations. Since 2019, OneWeb has been actively seeking investments from both its existing and new investors to fund its continuing operations and completion of the OneWeb System. In February 2020, OneWeb achieved its most momentous of development stages with the first launch of 34 satellites for its GEN-1 Constellation. Over the course of 2020, it was anticipated that OneWeb would continue with a monthly launch cadence to deploy the complete GEN 1 Constellation of 648 satellites. At that time, OneWeb had anticipated raising additional capital to meet its launch and constellation implementation schedule. However, OneWeb continued to face a rapidly deteriorating liquidity position as the cost of building out the OneWeb System exhausted its existing equity and debt financing. OneWeb engaged Guggenheim Securities, LLC (‘Guggenheim) in February 2020 to serve as its investment banker and assist the Debtors in their evaluation and pursuit of strategic opportunities.
OneWeb had been hopeful to achieve an out of court solution to its deteriorating liquidity position. After several due diligence meetings during the first and second weeks of March 2020, the Company believed that it was going to be able to secure a long-term funding arrangement from existing shareholders. However, on March 12, 2020, as the markets began to feel the impact of COVID-19, OneWeb was notified that its current investors would not commit to a long term solution. On March 16, 2020, OneWeb entered into a term sheet for bridge financing to be consummated by March 26, 2020. On March 21, 2020, the Company was notified that the bridge financing offer was unavailable. Unfortunately, the anticipated funding opportunities OneWeb pursued were significantly and precipitously impacted by the COVID-19 pandemic and the resulting shuttering of the global economy. OneWeb, in an effort to preserve liquidity during these difficult social, political, and economic times, began shutting down nonessential aspects of its business in order to preserve the value of its existing assets.
Corporate Structure Chart
About the Debtors
Prior to the Petition Date, OneWeb was in the process of deploying the world’s first global satellite communications network to deliver high-throughput, high-speed, low-latency Internet connectivity services, having an ability of channeling 50 megabits per second, with a latency of less than 50 millisecond, and capable of connecting everywhere, to everyone. Founded in 2012, OneWeb has spent the past eight years developing a low-Earth orbit (“LEO”) satellite constellation system and associated ground infrastructure, including terrestrial gateways (“Satellite Network Portals”, or “SNPs”) and end-user terminals, capable of delivering communication services for use by consumers, businesses, governmental entities, and institutions, including schools, hospitals, and other end-users whether on the ground, in the air, or at sea (the “OneWeb System”).
OneWeb’s business consists of the development of the OneWeb System, including the development of next generation, small-satellites being mass produced by a joint venture, and associated ground infrastructure, including operations centers, ground control facilities, SNPs, and various end-user terminals for various markets. In order to operate the OneWeb System, the Company holds various authorizations and licenses, including for the use of Ku-band and Ka-band radio-frequency spectrum on a global basis, and domestic market access/services authorizations necessary for operating the satellites and associated ground infrastructure. Having already completed three successful launches of over 70 satellites between February 2019 and March 2020, OneWeb was well on its way to growing its constellation to 648 satellites with the goal of beginning customer service demonstrations in late 2020 and providing full global commercial coverage by late 2021 or early 2022.
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The post OneWeb Global Limited – COVID-19 Claims Victim in Space as Softbank-Backed, Aspiring Global Satellite Network Fails to Secure Further Capital; Will Seek to Sell Assets appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.