C-band pay-out: Intelsat’s complex subsidiary structure

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Intelsat has dozens of inter-related subsidiary and sister companies. These associated business are creating significant headaches for its bankruptcy court, Intelsat’s many debtors and arch-rival SES.

SES, and some bond holders, are arguing that Intelsat is deliberately using these sister businesses to hide its current and especially future assets. Those future assets include the much-anticipated pay-out from the FCC of almost $5 billion in ‘incentive’ payments from the FCC for freeing up Intelsat’s C-band frequencies over the US.

Intelsat has told its bankruptcy court that the $4.8 billion coming from the FCC will belong to its licence-holding subsidiaries and not the prime trading – and arguably – parent business, or to the part of its business that has the greatest debts (Intelsat Jackson). Consequently, the payments could end up protected from those claiming compensation from the bankruptcy.

Intelsat has accused SES of deliberately running a “smear campaign” and argues that SES knew that the 50/50 revenue split died with the FCC’s decision to hold a public auction of the spectrum.

One motion for example, filed April 15th, from the ‘Ad-Hoc Committee of Parent Company Creditors’ argued that some sort of mediation should take place under the umbrella of the bankruptcy court to solve some of the headaches and avoid what it suggests will be “contested hearing” to Intelsat’s exit plan from bankruptcy.

The Committee pulls no punches in accusing other interest parties of “blackmail,” “extortion,” “threats,” “ransom,” or have agreed to pay “hush money” in a “transparent value grab”.

The Committee also points out that taxation figures highly in the end settlement, and argues that Intelsat’s Luxembourg formal domicile “would shield the Reorganized Debtors from paying any income tax in Luxembourg until at least 2030”. Just to show the complexities of this bankruptcy, there are four Luxembourg-relevant businesses (Intelsat Holdings, I-Investments, I-LuxCo and I-Jackson).

However, also on April 15th, a ‘Special Committee of the board of Intelsat’ comprising disinterested directors of Intelsat appealed for various objecting parties to avoid a “litigation quagmire” and asking for the Intelsat bankruptcy exit plan to proceed as planned.

April 15th saw the bankruptcy court approve some 30 motions, all routine in nature, and mostly concerning regular expense claims for the professional firms handling Intelsat’s bankruptcy. The amounts were, in some cases, considerable. Kirkland & Ellis, for example, filed an expense claim of $6.9 million for their work on behalf of Intelsat. Alvarez & Marshall filed for $7.2 million. Overall, the bankruptcy court allowed millions of dollars in claims for the quarter-year to November 30th 2020.

April 16 saw a motion filed by Intelsat’s lawyers asking for the judge to order a mediation “to attempt to build further consensus for the [Intelsat exit] Plan” which also said that Intelsat believes it has formal and informal requests from other parties to join a mediation exercise.

Intelsat’s bankruptcy court is currently scheduled to hear more of Intelsat’s exit plan on May 11th, although a court hearing today (April 19th) has about 22 individual motions for adjudication by the judge.


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