Intelsat’s bankruptcy fees cost it $288m
May 11, 2022
Declaring Chapter 11 bankruptcy protection is an expensive and often risky decision. Certainly, the costs for Intelsat’s declaration to adopt Chapter 11 cost it two years of – at best – marking time, major changes to its management team and risks that it could be penalised over the long-running dispute with SES over the division of FCC C-band payments.
Intelsat SA and its many sister companies entered Chapter 11 on May 13th 2020. It emerged from the process on February 23rd 2022.
But the legal bills are now in, and they are somehwat eye-watering. Intelsat is seeking final court approvals for a series of invoices totalling more than $288 million (€273m) to pay its myriad lawyers and retained professional advisors used during the bankruptcy process.
Some $121.6 million of that sum went to lawyers who worked on its reconstruction and emergence from bankruptcy and its associated litigation and formal compliance.
The sums involved are considerable. Deloitte Tax, for example, billed $36.7 million plus another $10 million for its Deloitte Financial Advisory division. Kirkland & Ellis, Intelsat’s main lawyers, billed $79 million. Turnaround specialists (‘restructuring advisors’) and management consultants Alvarez & Marsal billed $46.7 million, but there are dozens of others who helped build up the total of $288.37 million.
The filing to the bankruptcy court was made on May 6th by the official Fee Examiner who had earlier trimmed some costs from some of the invoices.
But still outstanding are the costs related to the litigation between SES and Intelsat over the claimed 50/50 division of FCC incentive payments. The trial over this dispute wrapped on April 19th and a decision is awaited by the judge to the bankruptcy reconstruction.
Also potentially still a headache is the ongoing Class Action involving shareholders to the (pre-bankruptcy) Intelsat and Intelsat’s then chairman David McGlade and alleging insider trading in Intelsat’s share dealing at the time of the bankruptcy being declared. Intelsat itself is not directly involved in these allegations but will undoubtedly want to maintain a watch over proceedings.
As for ‘new’ Intelsat, it is now owned by various funds and institutional investors of Germany’s Allianz SE. The European Commission approved, under EU Merger Regulations, the acquisition of the sole control of Intelsat Holdings SA by German Allianz SE. Allianz used Pacific Investment Management (PIMCO) to take 32.8 per cent of Intelsat while Allianz Asset Management of America LP holds the balance although there are various differences to those percentages depending on the specific Intelsat ‘sister’ companies.