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Intelsat lawyers explain Chapter 11 challenges

September 12, 2022

Steven Serajeddini, a partner in giant US law firm Kirkland & Ellis, which represented Intelsat during its Chapter 11 restructuring, has explained to LevFin Insights how, as debtors’ counsel, they overcame many of the challenges faced by Intelsat during the process. He said that key to the settlement was consensus although it took “two hard-fought years” to get the result.

Admitting that it took “blood, sweat and tears” to achieve agreement, full consensus only came about at the 11th hour.

Serajeddini said: “Folks are going to remember [the bankruptcy] for a long time. Part of it obviously is the size of the matter. It’s one of the largest filings of the past couple of years, and in addition to that, it had unique complexity in terms of how it started, which was a company whose greatest source of value rested in the hands of how the FCC would approach monetisation of its C-Band [spectrum].”

He explained that the FCC’s decision over how the C-Band would be monetised meant that there would be a significant shortfall, and not helped by the Covid-based downturn in business.

“It became clear pretty quickly that the best way to do that was going to be a Debtor in Possession [DiP] financing out of the senior secured position in the capital structure, which we were able to achieve.”

“Early on in the cases, Intelsat saw an opportunity to act on an acquisition of Gogo Inc.’s commercial aviation business. That took us down a road that is pretty rare for a chapter 11 debtor, which was to be a cash purchaser of significant assets, and we were able to close that transaction as well,” said Serajeddini.

He said that the challenges were in achieving a reconciliation with some “very sophisticated” advisors and not helped because of the large sums involved. “In a large case, you add a couple zeros to [the sum] and litigation becomes a more viable alternative for parties.”

“Looking back over my career,” he concluded, “I think it is one of my greatest accomplishments, with all credit to the client, fellow advisors, and the Kirkland team. We all really put in the blood, sweat and tears to get us to that point. It was about resiliency. It was about being principled, believing that the right answer was a negotiated outcome, and using all the tools available to a chapter 11 debtor to get there. It’s a testament to our process because you could just as easily have seen that case falter into long, value-destructive litigation.”

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