Intelsat’s bankruptcy court on December 3rd said the dispute between SES Americom and Intelsat would go to trial next June. The news coincides with a 126-page filing to Intelsat’s court from SES which pulls no punches in its claims.
At the heart of the legal dispute between SES and Intelsat is an argument over Intelsat’s handling of an alleged 50-50 agreed division within the C-Band Alliance (CBA) and how the FCC ‘incentive’ payments over the reallocation of both satellite operators’ C-band frequencies would be allocated. SES is claiming $1.8 billion from Intelsat.
The FCC-organised auction over the sale of the spectrum is taking place now.
The SES vs Intelsat legal action kicked off with a July 14th claim lodged by SES and where SES claimed damages and which included alleged breaches of contract, fiduciary duties and unjust enrichment. Intelsat firmly rejected the claim and in October added in its own allegations that SES had “improperly shared” a confidential report with the FCC and that the SES claims are without merit.
SES responded on December 4th, and described its action against Intelsat as being “about corporate desperation, greed, and dishonesty…Saddled with crippling debt and facing bankruptcy, Intelsat betrayed its faithful contractual partner in a brazen attempt to steal approximately $450 million. This case will hold Intelsat accountable for its unlawful and bad faith conduct”.
The SES filing to the court explains that for 16 months, the pair worked closely together and with a 50-50 agreement – it claims – firmly in place. SES supports its claim with “proofs” and a slew of documents and describes how the agreement was “repudiated” and renegade upon by Intelsat. “The 50-50 split was the cornerstone of the Agreement, with SES and Intelsat sharing control over the CBA and the vast majority of its proceeds equally, and the remaining proceeds going to the two other satellite operators in the CBA and covering the costs of the CBA. Without the 50-50 split, SES would not have entered into the Agreement,” says the SES document.
The court filing adds that even following the FCC’s decision to hold its own auction the two parties continued to work together for many months and reaffirmed the 50-50 split in words and conduct. Numerous documents were jointly filed to the FCC, some two dozen press releases issued, FCC officials met, joint technical work undertaken, and the commencement of updating the 50-50 Agreement started while retaining the 50-50 split.
The SES document explains how there was a celebratory dinner between Intelsat’s CEO Stephen Spengler and SES’s CEO Steve Collar following the FCC decision. But then, SES alleges, Intelsat reversed course. “At that critical time, Intelsat was facing severe financial distress, including a crippling amount of debt that exceeded $15 billion, and spiralling toward bankruptcy. The temptation to steal hundreds of millions of dollars from SES proved too great,” says the filing.
The document continues in similar vein, describing Spengler “contritely” making a telephone call to Collar at 3am (EST) one morning, and saying he had “a problem” and that the Agreement was no longer binding. “Mr. Collar was shocked. Intelsat’s position was a sham and pretext. Not only was it contrary to the parties’ course of performance under the Agreement, but also the written terms of the Agreement itself.”
“SES now seeks to recover for the massive harm that Intelsat’s breach will cause and for Intelsat’s intentional, wanton, and bad faith conduct. SES’s claims should be allowed in full, and Intelsat’s claim objection and motion for equitable subordination should be dismissed,” says the SES filing.
The key dates in the action now are:
February 7: The parties must make pre-trial disclosures
January 11: Third-party documents discovery
March 19: Expert testimony disclosed
April 30: All fact discovery completed
May 14: Rebuttals disclosed
May 28: Motions filed
June 7: Arguments narrowed, by agreement
June 14: Exhibits declared, and witnesses filed
June 28: Trial date, if not settled prior