August 30, 2021 – Further to their August 24th announcement that they had reached agreement with key stakeholders as to a comprehensive restructuring (and entered into an amended Plan Support Agreement), the Debtors have now requested Court authority to (i) enter into a $1.5bn replacement debtor-in-possession (“DIP”) financing facility (the "Replacement DIP Facility"); the proceeds of which will be used to repay in full their existing (and now fully drawn) $1.0bn DIP facility (the "Existing DIP Facility") and leave them with $500.0mn in additional liquidity "to continue clearing the C-band spectrum in accordance with the timeline set forth in the FCC Order" [Docket No. 2761]. The Replacement DIP Facility is comprised of (a) a $1.25.0bn senior secured superpriority term loan facility which will be available upon issuance of the Court's DIP order and (b) a $250.0mn superpriority delayed draw term loan which the Debtors can access with three days' notice any time after the DIP order is issued.
A hearing on the motion is scheduled for September 13, 2021, with objections due by September 10, 2021 [Docket No. 2762].
As compared to the Existing DIP Facility, the Replacement DIP Facility contains a few material differences:
- Increased Principal Amount. An increase in the principal amount of up to $1.5 billion, from $1 billion. The $1.5 billion includes a $1 billion term loan to refinance the Existing DIP Facility, a $250 million incremental term loan to be drawn immediately, and a $250 million incremental delayed draw term loan.
- Inflight Working Capital Basket. Increased to an amount equal to $300 million to fund adjustments to working capital incident to the Debtors’ operation and continued integration of the Intelsat Inflight LLC’s commercial aviation business.
- Option to Extend Maturity Date by 3 Months. The Scheduled Maturity Date, July 13, 2022, may be extended at the sole option of the DIP Debtors by up to three months, from July 13, 2022 to October 13, 2022 if necessary for regulatory approvals.
- Reduced Interest Rate. The drawn portion of the DIP Loans shall bear interest at a rate equal to LIBOR +475bps (as opposed to 550bps) per annum with a 1.00% LIBOR floor.
The Replacement DIP Facility also provides the DIP Debtors with the flexibility to increase the principal amount of funding by $500 million in two $250 million draws, the first of which will be made upon closing of the Replacement DIP Facility. Other than the differences outlined above, and certain other differences, the Replacement DIP Facility is substantially consistent with the Existing DIP Facility and the Existing DIP Order, including the collateral package, conditions precedent, events of default, or covenants, except that any such terms may be amended to account for circumstances that are no longer applicable.
The motion explains, “As of the filing of this Motion, the DIP Debtors have drawn the entire $1 billion available under their Existing DIP Facility. The DIP Debtors seek authorization to borrow up to $1.5 billion under the DIP Credit Agreement, consisting of (a) a senior secured superpriority term loan facility in an aggregate principal amount of $1.25 billion (the “Closing Date Term Loan Commitment”), and (b) a superpriority delayed draw term loan in an aggregate principal amount of up to $250 million (the “Delayed Draw Term Loan Commitment” and, together with the Closing Date Term Loan Commitment, the “DIP Commitments”). The Closing Date Term Loan Commitment will be available to the Debtors upon closing in a single draw (such date of the initial funding, the “Closing Date”) concurrently with entry of the Order and the Delayed Draw Term Loan Commitment will be available in a subsequent draw at the election of the Debtors after entry of the Order upon 3 business days’ prior notice. The refinancing of the Existing DIP Facility and access to the incremental capital will ensure that the Debtors remain adequately capitalized during these chapter 11 cases as they begin the solicitation on the Amended Plan. These funds will also allow the Debtors to continue their critical work toward clearing the C-band spectrum by the accelerated deadlines set by the FCC Order in light of the delay in the FCC’s reimbursement of the reasonable costs and expenses of clearing the C-band spectrum
Following months of extensive negotiations and mediation, the Debtors have executed the Amended PSA that is supported by holders of approximately $11 billion in claims, representing nearly 75% of the Debtors’ outstanding prepetition indebtedness across their capital structure, and filed the Amended Plan. The execution of the Amended PSA and filing of the Plan with the support of the vast majority of the Debtors’ key creditor constituents is a pivotal moment in these cases and lays the groundwork for a comprehensive restructuring that would reduce the Debtor’s funded debt obligations by approximately $8 billion and position the Company for long term success. Simultaneously, the Debtors have completed much of the work required to clear the C-band spectrum and receive the first of the two accelerated relocation payments provided for under the FCC Order, amounting to approximately $1.2 billion. In spite of these significant achievements, however, the FCC-directed reimbursement process for the costs and expenses of clearing the C-band spectrum has not proceeded on the expected timeline. The Debtors therefore require incremental liquidity in the lead up to confirmation.
To capitalize on the momentum generated by the Amended PSA and Amended Plan, and to adjust for these changed circumstances, the Debtors engaged with their existing DIP lenders to access additional capital to provide the Debtors with liquidity and flexibility to continue clearing the C-band spectrum in accordance with the timeline set forth in the FCC Order and for the benefit of the Debtors’ stakeholders. The Debtors’ continued operational achievements in clearing the C-band spectrum ahead of the aggressive deadlines in the FCC Order led to a swift capital raise and another endorsement by the Debtors’ creditors of the Company’s long-term value. The Debtors used the consensus reached on the Amended PSA to engage in discussions with the ad hoc group of certain creditors represented by Akin Gump Strauss Hauer & Feld LLP and advised by Centerview Partners LLC (the ‘Jackson Ad Hoc Group’), and the ad hoc group of certain creditors represented by Jones Day and advised by Houlihan Lokey Capital, Inc. (the ‘Jackson Crossover Ad Hoc Group,’ and together with the Jackson Ad Hoc Group, the ‘DIP Lenders’) regarding the terms of an incremental debtor-in-possession financing facility.
These discussions ultimately coalesced into the Replacement DIP Facility. As detailed further herein, the Replacement DIP Facility will refinance the Existing DIP Facility and provide an additional $500 million of liquidity to further facilitate the Debtors’ clearing of C-band spectrum in light of the revised timing forecast for reimbursement of the Debtors’ clearing costs.
… The refinancing of the Existing DIP Facility and access to the incremental capital will ensure that the Debtors remain adequately capitalized during these chapter 11 cases as they begin the solicitation on the Amended Plan. These funds will also allow the Debtors to continue their critical work toward clearing the C-band spectrum by the accelerated deadlines set by the FCC Order in light of the delay in the FCC’s reimbursement of the reasonable costs and expenses of clearing the C-band spectrum.”
Key Terms of Replacement DIP Facility:
- Borrower(s): Intelsat Jackson Holdings S.A.
- Guarantor(s): Each of Intelsat Jackson Holdings S.A.’s subsidiaries that is a Debtor in these Cases and Intelsat Velocity Holdings LLC and Intelsat Invoice Services LLC.
- Lenders: Certain members of the Intelsat Jackson Ad Hoc Group and Intelsat Jackson Crossover Ad Hoc Group that are lenders from time to time party to the DIP Credit Agreement.
- Term: The earliest of (a) the Scheduled Maturity Date; (b) the substantial consummation (as defined in Section 1101 of the Bankruptcy Code and which for purposes hereof shall be no later than the “effective date” thereof) of a Reorganization Plan filed in the Cases that is confirmed pursuant to an order entered by the Bankruptcy Court; (c) the acceleration of the loans and the termination of the commitment with respect to the Replacement DIP Facility in accordance with the Credit Documents; and (d) a sale of all or substantially all of the assets of Borrower (or the Borrower and the Guarantors) pursuant to Section 363 of the Bankruptcy Code.
- Commitment: A superpriority senior secured multi-draw term loan credit facility consisting of (a) a senior secured superpriority term loan facility in an aggregate principal amount of $1,250,000,000.00; and (b) a superpriority delayed draw term loan in an aggregate principal amount of up to $250,000,000.00 to be funded by certain of the Prepetition First Lien Lenders that are members of the Jackson Ad Hoc Group and certain of the Prepetition First Lien Lenders that are members of the Jackson Crossover Ad Hoc Group; of which $1,250,000,000.00 will be available upon the Closing Date in a single draw, concurrently with entry of the Final Order and the remaining amounts will be available in a subsequent draw at the election of the Borrower after the entry of the Final Order and shall be made available upon 3 business days’ prior notice and in the principal amount of $250,000,000.00 (each date DIP Loans are funded, a “Funding Date”). Amounts repaid on the DIP Facility may not be reborrowed.
- Interest Rates: The drawn portion of the DIP Loans shall bear interest at a rate equal to LIBOR +475bps per annum with a 1.00% LIBOR floor. The undrawn portion of the DIP Loans shall be subject to a ticking fee at a rate of 3.60% per annum (the “Ticking Fee”) calculated on the amount of the outstanding DIP Commitments accruing from the date of the Order, payable monthly in cash. Interest and the Ticking Fee shall be payable in cash and shall be calculated on the basis of the actual number of days elapsed in a 360 day year. During the continuance of an event of default, the DIP Loans will bear interest at an additional 2.00% per annum above the rate described above. Default interest shall be payable in cash on demand.
- Fees:The Debtors are authorized and directed to pay all reasonable and actual fees and expenses as provided in the Order, including:
- an upfront fee of 0.75% of the aggregate principal amount of the funded DIP Loans (the “Upfront Fee”), which may, at the discretion of the Required DIP Lenders, be structured as original issue discount;
- a Ticking Fee of 3.60% per annum calculated on the amount of the outstanding DIP Commitments accruing from the date of the Order, payable monthly in cash;
- a supplemental fee of 0.685% of the aggregate principal amount of the DIP Commitments (the “Supplemental Upfront Fee”), earned and payable to the DIP Lenders on the Closing Date;
- an extension fee of 0.10% of the aggregate principal amount of the DIP Loans and unfunded DIP Commitments, in each case, then outstanding (the “Extension Fee”), payable in cash if the DIP Debtors elect to extend the original Scheduled Maturity Date (as defined in the DIP Credit Agreement); and
- all reasonable costs and expenses as may become due from time to time under the DIP Documents and this Final Order, including, without limitation, fees and expenses of counsel, financial advisors, and other professionals retained by the DIP Agent and the DIP Lenders, as provided for in the DIP Documents and this Final Order, subject to paragraph 25 of the Order.
- Maturity Date: October 13, 2022.
- Use of DIP Facility Proceeds and Cash Collateral: The Debtors are hereby authorized to use all Cash Collateral solely in accordance with the Order and the DIP Documents, including, without limitation, to make payments on account of the Adequate Protection Obligations and other obligations provided for in the Existing DIP Order (including, without limitation, any indemnification obligations), the Order and the DIP Documents, including, for the avoidance of doubt, (a) for working capital needs of the DIP Debtors in the ordinary course of business, (b) for C-band relocation costs, (c) for investment and other general corporate purposes, and (d) for the costs and expenses of administering the Cases, including for payment of any Adequate Protection Obligations. Except on the terms and conditions of the Order, or as otherwise agreed to by the DIP Agent acting at the direction of the Required Backstop Parties, the Debtors shall be enjoined and prohibited from at any time using the Cash Collateral. For the avoidance of doubt, no proceeds from the DIP Loans or any Cash Collateral of the Prepetition Secured Parties shall be transferred from any DIP Debtor to any Debtor that is not a DIP Debtor.
On August 24th, the Debtors filed an Amended Chapter 11 Plan and a related Disclosure Statement, with each attaching redlines showing changes from the version filed on February 12, 2021 [Docket Nos. 2692 and 2693, respectively].
In a press release (see also also 8-K on PSA and which attaches cleansing materials) announcing the filing of the Plan, the Debtors stated, “Intelsat S.A…today announced that it has obtained the support of key creditor constituencies on the terms of a comprehensive financial restructuring that would reduce the Company’s debt by more than half – from nearly $15 billion to $7 billion – and position the Company for long-term success….
The Plan, which has been the subject of extensive negotiations with the Company’s creditors and resolves a multitude of complex issues among them, has the support of holders of approximately $3.8 billion of the Company’s funded debt. These supporting creditors have executed a Plan Support Agreement that binds their support for the Company’s Plan.
The Company is seeking Court approval of the Disclosure Statement and to establish procedures to solicit votes on the Amended Plan at a hearing scheduled for September 1, 2021.
Today’s filings and the widespread consensus in support of the Amended Plan help to achieve completion of the financial restructuring process and the Company’s emergence from Chapter 11 by the end of 2021. The Amended Plan provides that Intelsat will emerge as a private company, with the support of new equity owners, to best advance its strategic objectives and accelerate its growth trajectory, with a path to becoming publicly traded again at some point in the next five years.”
The PSA commits the Debtors to have obtained Plan confirmation and then Plan effectiveness within 120 and 180 days of August 24, 2021, respectively.
Overview of Plan
The Amended Disclosure Statement [Docket No. 2693] providess, “The Amended Plan provides for the reorganization of the Debtors as a going concern with a deleveraged capital structure and sufficient liquidity to fund the Debtors’ post-emergence Business Plan and continue clearing activities to enable the Debtors to be eligible for the Accelerated Relocation Payments.
Specifically, the Amended Plan provides the Debtors with a New Capital Structure consisting of $7.125 billion in New Debt, which may include New Term Loans and New Notes that may be fully backstopped by the Backstop Parties.
Pursuant to and in accordance with the Amended Plan Support Agreement and Amended Plan, upon consummation of the Restructuring Transactions, the Debtors will fully repay the DIP Facility with proceeds from the New Debt. The Equity Issuer will issue 96.0 percent of the authorized but unissued New Common Stock to Holders of Allowed Jackson Unsecured Claims and 4.0 percent to Holders of ICF Unsecured Claims, each subject to dilution in accordance with Dilution Principles. The Equity Issuer will also issue 100.0 percent of the Series A Warrants and approximately 46.4 percent of the Series B Warrants to Holders of ICF Unsecured Claims, approximately 6.3 percent of the Series B Warrants to Holders of S.A. Unsecured Claims, and approximately 47.3 percent of the Series B Warrants to Holders of Envision Unsecured Claims. Any New Common Stock issued upon the exercise of the New Warrants shall be subject to dilution pursuant to the Dilution Principles. The CVR Issuer will issue 100 percent of the Series A CVRs and 67.5 percent of the Series B CVRs to Holders of Jackson Unsecured Claims, and 32.5 percent of the Series B CVRs to the Holders of ICF Unsecured Claims.
The Amended Plan Support Agreement attached hereto as Exhibit G also includes agreement on a standstill on the prosecution of such Guarantee Claims by and among each of the Parent Guarantors (as defined herein), the Jackson Crossover Ad Hoc Group, and the HoldCo Creditor Ad Hoc Group.
Additionally, the Amended Plan contains customary release, exculpation, and injunction provisions, which will facilitate the Debtors’ successful reorganization by providing certainty in connection with the Amended Plan to the Reorganized Debtors and each of the Debtors’ stakeholders.
In the event that the Plan is not confirmed as to Holdings SARL and/or Intelsat S.A. (a “Plan Toggle Event”), the Debtors shall immediately seek, and the Parties to the Amended Plan Support Agreement shall support, the Confirmation of the “Non-TopCo Plan” without the need to resolicit votes on the Non-TopCo Plan. Upon conversion to the Non-TopCo Plan, all references in the Amended Plan to the “Plan” and any references herein to the “Amended Plan” shall be deemed to refer to the Non-TopCo Plan. Any references to the Debtors shall be deemed to refer to all of the Debtors other than whichever (or both) of Intelsat S.A. and Holdings SARL that a Plan Toggle Event occurs with respect to. The Non-TopCo Plan shall be consistent in all respects with the terms of the Amended Plan (including, for the avoidance of doubt, the treatment of Claims provided under the Plan for all classes of creditors other than creditors of Holdings SARL and/or Intelsat S.A.). The Non-TopCo Plan may differ from the Amended Plan as required to remove Holdings SARL and/or Intelsat S.A. from the Amended Plan and which shall (unless waived in accordance with the Amended Plan Support Agreement) still require that the Settlement Agreement Order be entered as a condition precedent to confirmation of the Non-TopCo Plan, and otherwise be in form and substance reasonably acceptable to the Debtors and the Required Consenting Unsecured Creditors. The Debtors believe that the Amended Plan (including the Non-TopCo Plan, if applicable) is in the best interests of the Debtors’ estates, and represents the best path forward at this time….”
Events Leading to the Chapter 11 Filings
In a declaration in support of the Chapter 11 filing (the “Tolley Declaration”) [Docket No. 6], David Tolley, the Debtors’ Executive Vice President,Chief Financial Officer,and Co-Chief Restructuring Officer, detailed the events leading to the Debtors’ Chapter 11 filing.
The Tolley Declaration provides: “The Debtors have commenced these cases to efficiently access capital and engage with stakeholders through a chapter 11 process. The Debtors require this capital to meet two unexpected, external challenges that have recently arisen. Specifically, the Debtors require sufficient capital to (a) comply with the FCC’s February 28, 2020 order to “clear” operations from the 3700–4000 MHz radio frequency spectrum and obtain up to $4.87 billion in Accelerated Relocation Payments, and (b) address the significant reduction in revenue and cash flow associated with the ongoing COVID-19 pandemic.
As of the Petition date, the Debtors had approximately $14.8bn of third-party funded debt obligations, with an annual interest expense of approximately $1.13bn. The following simplified organizational chart and table depicts the Debtors’ prepetition capital structure as of the Petition Date:
Read more Bankruptcy News
The post Intelsat S.A. – With Amended Plan Support Agreement Executed, Debtors Seek Court Authority for $1.5bn Replacement DIP Facility to Provide $500mn of Additional Liquidity to Cover C-Band Spectrum Obligations appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.