OneWeb investors saw bankruptcy coming
August 5, 2020
By Chris Forrester
A filing to the US bankruptcy court handling OneWeb’s Chapter 11 bankruptcy on August 3rd states that investors in OneWeb saw the company’s bankruptcy as likely from the middle of 2018.
The key investors were SoftBank, Airbus, Qualcomm, Banco Azteca, and the Government of the Republic of Rwanda and the filing argues that these controlling shareholders in OneWeb had bought some $1.6 billion of OneWeb’s promissory Notes.
“At the time it issued the Notes, OneWeb was a mere ‘project’ that aspired to one day become an operating business—it had no customers, was years away from generating revenue, and had no means of repaying a legitimate loan,” says the filing. The application argues that the debt represented by these Notes was actually capital contributions and should be treated as equity.
The filing states: “In 2018 and 2019, after OneWeb failed to raise additional financing from third-party lenders—all of whom refused to lend to a company with no operations and no revenues—the Investor Defendants agreed to infuse an additional nearly $1.6 billion of capital in the form of the Purported Notes.”
“Consistent with the investors’ expectations, the terms of the Purported Notes made clear that OneWeb would have no obligation to make interest payments prior to maturity and that the Investor Defendants would receive equity in the Company (in the form of convertible “notes” and/or stock warrants) as part of their investments,” the filing continues.
The filing reminds the Court that that OneWeb originally planned to begin services by late 2021 or early 2022 but “never came close to meeting this goal”.
It lists the fresh borrowing which came into OneWeb (mostly by SoftBank) and also tells of OneWeb’s use of Barclays Bank to identify potential lenders. “Neither OneWeb nor Barclays could identify an outside lender willing to provide the necessary financing,” states the filing.
Cash was raised from Softbank totalling $408 million during 2018 and January 2019.
While much of the fling is redacted from public examination, the key allegations are that OneWeb was undercapitalised and suffered commensurate liquidity, and that the various investors (and buyers of the OneWeb’s Notes) were working on then assumption that that they would have priority over other shareholders and third-party creditors in the event of bankruptcy.
The amount owed to the named investors now totals $1.733 billion. The 546-page filing asks the Court – in essence – to approve a situation where the Notes are recharacterised as equity interests.