July 6, 2020 – Further to their July 2nd announcement that they had agreed a sale of their assets to a consortium led by Her Majesty’s Government ("HMG") and Bharti Global Limited ("Bharti," and together with HMG, the "Plan Sponsor"), the Debtors have requested authority to amend their existing debtor-in-possession (“DIP”) facility to allow for the additional funding needed to see them through the closing of the sale [Docket No. 370 with the DIP Amendment filed at Docket No. 375].
The terms of the sale are memorialized in a Plan Support Agreement (the "PSA," see Docket No. 367, Exhibit A) and include the Plan Sponsors' agreement to provide $110.0mn of new money DIP financing; with the new money being made available through a combination of (i) the Plan Sponsor "stepping in" to take a $45.0mn unfunded position in respect of the existing DIP Facility and (ii) providing additional funding commitments of approximately $65.0mn under that facility. The Debtors note that "Significantly, not only will the Interim Funding provide the Debtors with the liquidity needed to bridge to a successful closing of the Transaction, the terms under which the Plan Sponsor has agreed to fund these loans are materially better than those under the DIP Facility in several respects [see more below]."
A hearing on the motion has been requested for July 10th, with objections due by July 9th.
The requesting motion states, “In connection with the comprehensive bidding and sale process established by the Bidding Procedures Order, the Debtors selected BidCo 100 Limited (‘BidCo’ or ‘Plan Sponsor’), as the successful bidder to acquire the newly issued common stock of reorganized OneWeb Global Limited through a chapter 11 plan of reorganization (the ‘Transaction’). In order to fund these cases through the closing of the Transaction, the Debtors require additional liquidity, as anticipated in the Bidding Procedures Order.
To that end, as memorialized in the Plan Support Agreement (the ‘PSA’) with the Plan Sponsor, the Plan Sponsor has committed to, among other things, (i) step in as a lender under the Debtors’ post-petition term loan facility (the ‘DIP Facility’), and (ii) provide additional funding thereunder to address those liquidity needs. To effectuate the Plan Sponsor’s commitments, certain modifications to the Loan Documents are required.
The PSA contemplates that the Plan Sponsor will provide up to $110 million of new-money funding to the Debtors through (i) taking assignment of or replacing, and funding, approximately $45 million of the currently unfunded new-money commitments under the DIP Facility (the ‘Unfunded Commitments’), and (ii) additional funding commitments of approximately $65 million under the DIP Facility (as amended on the terms described herein) (the ‘Additional Commitments’ and, together with the Unfunded Commitments, the ‘Interim Funding’). Significantly, not only will the Interim Funding provide the Debtors with the liquidity needed to bridge to a successful closing of the Transaction, the terms under which the Plan Sponsor has agreed to fund these loans are materially better than those under the DIP Facility in several respects.
Among other things:
- No Additional Roll-Up. Neither the Unfunded Commitments nor the Additional Commitments will give rise to any roll-up of prepetition claims when funded by the Plan Sponsor.
- No Requirement to Repay the Interim Funding in Cash Upon Plan Consummation. Upon the closing of the Transaction, the Interim Funding will be converted to BidCo’s equity at the same valuation as the $100 million in BidCo equity that will be issued to the holders of the allowed secured notes claims under the contemplated plan of reorganization for the Debtors (the ‘Plan’).
- Immediate Access to Additional Liquidity. As reflected in the Debtors’ updated 13-week budget, the Debtors require the additional liquidity provided by the Interim Funding to fund their operations and the costs of administering these cases through the consummation of the Transaction. The Lead Lender under the existing DIP Facility, however, has indicated to the Debtors’ advisors that the current DIP lenders do not wish to fund the amounts the Debtors estimate are necessary to operate through consummation of the Plan. The Plan Sponsor not only has committed to fund the Additional Commitments, subject to the Court approving the requested modifications to the DIP Facility, the Debtors expect the Plan Sponsor to fund the Unfunded Commitments by no later than July 13, 2020.
- Certainty of Funding. Absent the requested modifications to the DIP Facility, the funding of the Unfunded Commitments is currently subject to the Lead Lender’s discretion. The Plan Sponsor has agreed to remove that conditionality for its funding of both the Unfunded Commitments and the Additional Commitments. In addition, so long as the Debtors comply with the updated DIP budget delivered to and approved by Plan Sponsor before the execution of the PSA, the Plan Sponsor will be obligated to fund the Unfunded Commitments in accordance with the DIP Facility, even if the PSA terminates in accordance with its terms (other than a termination resulting from the Debtors exercising their “fiduciary out” thereunder).
- Preservation of Going Concern Enterprise. The funding provided by the increased DIP Facility will, among other things, be used by the Debtors to make prepayments under their satellite production contract with Airbus OneWeb Satellites LLC (“AOS”), which, in turn, will allow AOS to preserve its supply chain and resume constructing the satellites, as envisioned and required by the Transaction. The commitments of the Plan Sponsor with respect to the Transaction are contingent on the Debtors maintaining their joint venture interests in AOS. The satellite production contract will be amended to provide for the prepayments and also provide Debtor Network Access Associates Ltd. (the counterparty to the satellite production contract) with a first lien on both the in-production satellites and certain of AOS’ other assets until the satellites are delivered (or the prepayments are returned).
- Recalibration of Milestones. The milestones under the existing DIP Facility and the Final Cash Collateral Order shall be superseded and replaced with the milestones set forth in the PSA, which are much more reasonable and will be easier for the Debtors to achieve in the lead up to the closing of the Transaction."
Key Changes in the DIP Amendment:
- Assignment of Unfunded Commitments and Additional New-Money Commitments: Plan Sponsor shall (i) take assignment of or replace, and fund, approximately $45 million of the Unfunded Commitments, and (ii) provide Additional Commitments of approximately $65 million under the DIP Facility.
- Priorities of DIP Loans: The Interim Funding will be pari passu with the existing new money DIP loans and senior to the existing “roll-up” DIP loans under the DIP Facility.
- Lead Lender: The Plan Sponsor will be included within the definition of “Lead Lender”
- Milestones: The milestones under the existing DIP Facility and the Final Cash Collateral Order shall be replaced with the following milestones set forth in the PSA:
- no later than 7 calendar days after the Debtors enter into the PSA, the Debtors shall have filed this Motion;
- no later than 7 calendar days after the Debtors file this Motion, the Court shall have entered binding orders approving (i) the PSA (the “PSA Approval Order”) and (ii) the Proposed Order;
- no later than 50 calendar days after the Debtors enter into the PSA, the Court shall have entered an order approving the disclosure statement for the Plan (the “Disclosure Statement Order”);
- no later than 45 calendar days after the Court enters the Disclosure Statement Order, the Court shall have entered an order confirming the Plan (the “Confirmation Order”); and
- no later than 45 calendar days after the Court enters the Confirmation Order, the Transaction shall have been substantially consummated; provided that such milestone shall be automatically extended for an additional 90 days solely to the extent regulatory approvals remain outstanding for the spectrum sale.
- No Roll-Up: The Loan Documents will provide that no roll-up of prepetition debt will occur in connection with the funding of the DIP loans provided by the Plan Sponsor.
- Additional Event of Default: A new Event of Default in the DIP Credit Agreement will provide that, if the PSA is terminated due to the Debtors’ exercise of their “fiduciary out” thereunder, all commitments to fund the Interim Funding will automatically terminate and all then outstanding obligations under the DIP loans provided by the Plan Sponsor, including accrued interest, shall automatically accelerate and become due and payable, together with an exit fee of 5% of the amount of the Plan Sponsor’s initial aggregate commitment of $110mn.
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