Covid puts Global Eagle into Chapter 11 bankruptcy
July 23, 2020
By Chris Forrester
In-Flight Entertainment and broadband communications supplier, Global Eagle Entertainment (GEE) has entered Chapter 11 bankruptcy.
The company had been clear in the recent past that the near-total collapse of the world’s airline and related passenger traffic was putting the business under strain. Moody’s Investors Services had downgraded GEE’s rating to PD/LD which translates as a “probability of default” on July 16th and with a “Negative” outlook.
GEE told the US Bankruptcy Court in Delaware that while it had some $630 million in assets it had total debts and liabilities of $1.09 billion and over 10,000 creditors. Some of those creditors include major capacity suppliers to GEE including SES ($26.6m), Intelsat ($9.8m), Star Satellite, Yahsat ($3.6m), Hughes ($3.06m), Telesat ($2.5m) and Arabsat ($1.05m).
It has secured fresh ‘Debtor in Possession’ (DiP) financing from a group of private equity lenders including Apollo Global Management, Eaton Vance Management and others including cash from BlackRock Financial. This funding will likely result in a debt-for-equity swap where holders of 90 percent of the company’s Senior Term Loans will acquire the business for $675 million.
“We expect to emerge from this process with a stronger balance sheet, significantly reduced debt and substantial liquidity,” GEE/Chief Executive Joshua Marks said in a statement.
The company added that it had suffered a sharp drop off in business because of the Covid-19 virus.
The new owners will see the company emerge with $475 million less debt on its books. The new owners will also provide GEE with an initial $80 million in funding during the DiP process.