A motion lodged on March 12th, into the US bankruptcy court handling Intelsat’s Chapter 11 bankruptcy reconstruction, argues that one group of claimants on Intelsat’s debt promises is adopting a “scorched Earth” litigation policy in order to “extract an unjustified degree of leverage in these cases.”

The motion was filed by the trustees for the [Intelsat sister business] Jackson 5.5 per cent unsecured notes (and other borrowings) issued by [Intelsat] Jackson. To date more than $7 billion is owed by Intelsat based on its ‘Jackson’ series of borrowings.

The motion specifically challenges an earlier court filing made by ‘The Convertible Group’ (of lenders of the most junior debt). The trustees say: “Facing dim prospects for recovery on deeply subordinated debt, the Convertible Group has initiated a scorched earth litigation strategy to extract an unjustified degree of leverage in these cases.”

The filing (at a mere 555 pages) starts by saying: “It is unclear why the Convertible Group feigns ignorance about the Parent Claims and mischaracterizes the Master Proofs of Claim in the Claim Objection. Despite thirteen pages of detail regarding the claims asserted in each Master Proof of Claim, the Convertible Group attempts to frame the Parent Claims as only one paragraph long. That characterszation is incorrect.”

The Jackson borrowings are guaranteed by 33 other debtors and with 27 of the named guarantors either direct or indirect subsidiaries of Jackson.

The trustees say that, on April 15th 2020, Jackson failed to make a $125 million interest payment due against one batch of borrowings. They say: “At 10:43 p.m. (ET) on May 13, 2020, approximately one hour before the Debtors began to initiate their Chapter 11 cases, the Parent Guarantors delivered a notice to the Jackson Unsecured Trustee of each Jackson Unsecured Indenture purporting to release the Parent Guarantees with immediate effect.”

The trustees are arguing that these Parent Guarantor releases were illegal and that the Parent Guarantors should still be held responsible.

The argument is due to be heard by the bankruptcy court on April 14th.

Other posts by Chris Forrester:

1. Optimism under threat at SES
2. Rivada visits Terran Orbital’s manufacturing HQ
3. Avanti wins spectrum debt obligation case
4. SpaceX breaks records for re-use launchers
5. IRIS2 already in trouble?
6. Intelsat contemplates next steps
7. SpaceX: 2.7m customers and $180bn value
8. Boeing, Virgin Galactic in court battle
9. Jupiter-3 a changemaker

Categories: Blogs, Inside Satellite

Tags: Chapter 11 bankruptcy, Intelsat