It has long been a complaint from SES that Intelsat, in its complex Chapter 11 bankruptcy, is using associate and sister businesses to shift incoming cash (and in particular the so-called incentive payments from the FCC over the C-band reallocation of spectrum). SES describes the Intelsat action as playing a “shell game” and that Intelsat is using sleight of hand in how it proposes allocating the FCC’s incentive payments.
The matter was raised again in a motion to Intelsat’s bankruptcy court on August 30th where SES again objected to the risk of Intelsat “siphoning billions of dollars from the Debtors’ principal operating entity, Intelsat US, and disadvantage SES, their main competitor and one of Intelsat US’s largest creditors.”
SES argues to the court: “Without explanation or justification, the Debtors proposed to allocate their most valuable assets—the Accelerated Relocation Payments—to Intelsat Jackson and Intelsat Alliance, which are holding companies with no role in the C-Band clearing process and no plausible claim to the clearing proceeds. [Intelsat] is allocating just a tiny percentage of the Debtors’ remaining enterprise value to Intelsat US, even though Intelsat US is the primary engine of the Debtors’ business, encompassing the majority of the Debtors’ employees and customer contracts, and the entity that is actually doing the C-Band clearing work that generates the Accelerated Relocation Payments.”
“Now, after months of mediation, what began as a shell game has become a farce. In an Amended Plan and Amended Disclosure Statement filed barely a week prior to the scheduled disclosure statement hearing the Debtors have proposed an Amended Plan that, among other things, is premised on a brand new (and once more indefensible) allocation of the Accelerated Relocation Payments, dividing them between Intelsat Jackson (42.7 per cent), Intelsat License (49.9 per cent), and Intelsat US (7.4 per cent),” alleges SES.
“Incredibly, despite the token increase in the allocation of Accelerated Relocation Payments to Intelsat US (from 0 pr cent to 7.4 per cent) and an increase in total distributable value available to creditors, the Debtors and the creditor groups supporting the Amended Plan have reengineered the allocation model so that recoveries to unsecured creditors of Intelsat US will actually decrease by nearly 40 per cent relative to the Debtors’ February 2021 proposal,” adds SES.
SES says it is open to resolving these disclosure issues on a consensual basis and has proposed language herein that would resolve its objections. (In some cases, only the Debtors have the information necessary to provide the required disclosures.) “But unless and until the Disclosure Statement is amended to include the disclosures referenced above, the Disclosure Statement lacks adequate information as required by section 1125 of the Bankruptcy Code and cannot be approved.”
SES alleges that for more than six months Intelsat has withheld from SES financial data and other evidence critical to substantiating SES’s plan objections on the basis that such discovery will be produced only when the Debtors’ experts prepare a revised allocation of value and complete their expert reports in support of the Amended Plan. “After months of delay, it would be manifestly unfair to hold a confirmation hearing on an expedited timeline that denies SES and other objecting parties the time they need to take appropriate discovery and, if necessary, prepare expert reports in support of their objections. SES has proposed an alternative schedule for the Court’s consideration.”