Last week, the news emerged that SES had dropped its massive $1.35 billion claim on rival Intelsat for “punitive damages” over the way Intelsat handled the negotiations with the FCC and the division of FCC ‘incentive’ payments over the C-Band Alliance.
The removal of the claim allows Intelsat’s Chapter 11 bankruptcy to proceed and cancels a major obstacle within the bankruptcy.
However, and most Importantly, the removal of the claim does not resolve SES’s claims against Intelsat for breach of contract, unjust enrichment, and breach of fiduciary duties. Lawyers for SES anticipate that a trial on those claims will be scheduled for early 2022. If SES prevails on its claims, Intelsat will be obligated to make payment to SES in accordance with distributions provisions in the Amended Plan of Reorganization.
In fact, SES is almost certainly in a stronger position now than it was prior to the cancellation of the $1.35 billion claim in that it can now move its case against three Intelsat businesses: Intelsat SA (which was the original action) and now be widened to include Intelsat License LLC and Intelsat Jackson Holdings.
The FCC’s decision was that its cash would go to Intelsat License which is the formal holder of Intelsat’s satellite licences (along with one licence held by [Intelsat] Horizons-3, a joint-venture craft owned by Intelsat and Japan’s Sky Perfect JSAT).
However, at least one legal opinion is that the FCC cash should go to Intelsat SA. But either way, SES can now mount its action against the three key Intelsat businesses in early 2022. SES is seeking an additional $421 million which would make its FCC pay-out match that of Intelsat.
Perhaps helping matters for SES is that Intelsat has had to make provision for the equalisation pay-out in the current bankruptcy reconstruction under the terms of the agreement with SES. The court, of course, will decide if SES has made a successful argument.
The formal agreement between SES and Intelsat’s lawyers says: “Following arm’s length discussions by and among the Debtors, SES, and certain of the Debtors’ other stakeholders, the parties have reached a consensual resolution of the SES Objection… By this Settlement Agreement, the Parties, to avoid the cost and uncertainty of litigation, desire to compromise and resolve in the context of the Plan the remaining outstanding issues among the Parties related to the SES Plan Objection.”