Intelsat’s exit from its Chapter 11 restructuring could be badly delayed and distributions to other creditors limited by the dispute between SES and Intelsat over C-band payments from the FCC.
SES is claiming at least $420 million, and potentially $1.8 billion if the bankruptcy court awards punitive damages, over the way the FCC’s incentive payments were divided between Intelsat and SES.
Intelsat filed its exit plan from Chapter 11 back in February having entered bankruptcy protection in May 2020.
The SES claim, in essence states: “SES asserts that [Intelsat] owes money (or will owe money) to SES pursuant to certain alleged contractual and fiduciary obligations made in the context of the consortium agreement between Intelsat US LLC, SES, and other satellite operators (the “Consortium Agreement”).”
The basis of the claim states: “SES alleges it is entitled to 50 percent of the combined payments that may eventually be payable to the Debtors and SES pursuant to the FCC Order, which provides for Accelerated Relocation Payments subject to the satisfaction of certain deadlines and other conditions set forth therein.”
Intelsat’s bankruptcy court has now set aside September 20th-October 1st to hear arguments on the SES claim. Witnesses are expected to appear in person (should a witness be unavailable during the agreed period then the court will hear that witness no later than October 30th). Currently, it is unclear whether the confirmation hearing on Intelsat’s reorganisation and thus exit from bankruptcy will be heard before or after the trial.
Sources suggest that while Intelsat’s exit from Chapter 11 is not necessarily tied to the final resolution of the SES claims, until the amount of SES’s claim is determined by a final, and non-appealable order, a reserve will likely be ordered by the court for any payment or distribution that may be due to SES and be established so that any payment or distribution to SES would be protected if Intelsat is permitted to exit Chapter 11 before that final order.
The September 20th trial will be decided by the bankruptcy court’s Judge Keith Phillips. However, either party can appeal the judge’s decision and given the sums involved seems likely. Any appeal will not necessarily delay Intelsat’s exit from bankruptcy if the SES claims can be decoupled from the Intelsat exit plan with the claim protected during any appeal process.