Global Eagle Entertainment in bankruptcy, gets $675 million lead bid

By Caroline Salls

Pittsburgh, July 22 – Global Eagle Entertainment Inc. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware and has reached a stalking horse agreement under which substantially all of its assets will be acquired for $675 million by an entity established at the direction of holders of 90% of the company’s senior secured first-lien term loans, according to a news release.

The investor group includes lenders managed by Apollo Global Management, Inc., Eaton Vance Management, Arbour Lane Capital Management, LP, Sound Point Capital Management, Mudrick Capital Management and funds and accounts under management by BlackRock Financial Management, Inc.

Global Eagle said the proposed transaction will have no significant impact on its global operations as the company continues to provide services to all of its customers in the ordinary course, before and after the transaction.

As a result of the proposed transaction, the company said it will reduce its total debt by about $475 million and obtain significant additional liquidity, positioning it to continue driving long-term innovation and growth and serving its customers around the world.

Under the timeline proposed by the company, initial bids would be due 42 days following the bankruptcy filing date and final bids by 75 days from the filing date, and an auction would be held 80 days from the filing date, if necessary.

The minimum bid increment will be $1 million.

“While we made important progress last year managing our cash flow and reducing operating expenses, we have been particularly impacted by Covid-19-related travel restrictions and demand declines in both airline and cruise end-markets,” Global Eagle chief executive officer Joshua Marks said in the release.

“We expect to emerge from this process with a stronger balance sheet, significantly reduced debt and substantial liquidity, well-positioned to continue supporting our global customers into the future.”

Apollo credit business segment managing director Jeffrey Rosen said in the release “While the company reports that it has been impacted in recent months by Covid-19, we believe it benefits from a blue-chip customer base, industry-leading partnerships and an innovative platform built through years of strategic investments in technology.”

Financing terms

In connection with this in-court process, Global Eagle said it will be obtaining $80 million in debtor-in-possession financing from the investor group that, together with cash generated from ongoing operations, is expected to provide ample liquidity to support its operations during the sale process.

The facility will mature in six months, subject to a 30-day extension.

Interest will accrue at Libor plus 1,000 basis points, with a 1.25% Libor floor.

A $30 million draw will be available upon entry of an interim DIP financing order.

The company said the acquisition is expected to be financed by an additional investment in the business in the form of a $125 million four-year exit facility, which would include assumption or refinancing of the DIP financing.

Interest on the exit facility will also accrue at Libor plus 1,000 bps with a 1.25% floor.

The proposed transaction will be implemented under the terms of a restructuring support agreement reached with the investor group.

The proposed sale transaction is subject to higher or better offers and other customary conditions.

Global Eagle has filed a number of customary motions seeking court approval to continue supporting its operations during the court-supervised process, including the continued payment of employee wages and benefits.

The company said it intends to pay vendors and partners to its affected U.S. subsidiaries in full under normal terms for goods and services provided on or after the filing date. Vendors to non-U.S. subsidiaries will continue to be paid in the ordinary course, regardless of when goods or services were delivered.

Debt details

According to court documents, Global Eagle had $630.5 million in total assets and $1.086 billion in total debt as of July 8.

The company’s largest unsecured creditors are U.S. Bank NA of Cincinnati, with an $82.5 million 2.75% convertible notes claim; New Skies Satellites BV of Betzdorf, Luxembourg, with a $26.61 million trade claim; Intelsat USA Sales Corp. of McLean, Va., with a $9.75 million trade claim; Star Satellite Communications Co. of Abu Dhabi, with a $3.57 million trade claim; BMG Rights Management (US) LLC of Los Angeles, with a $3.5 million licensing fees claim; Hughes Network Systems of Germantown, Md., with a $3.06 million trade claim; Telesat International Ltd. of Ottawa, with a $2.51 million trade claim; Qest Quantenelektronische Systeme GmbH of Holzgerlingen, Germany, with a $1.98 million trade claim; Lionsgate Entertainment of Santa Monica, Calif., with a $1.91 million trade claim; and Santander Teleport of Santander, Spain, with a $1.88 million trade claim.

Latham & Watkins LLP is serving as the company’s legal counsel. Greenhill & Co., Inc. is serving as financial adviser, and Alvarez & Marsal is serving as restructuring adviser.

Based in Los Angeles, Global Eagle is a provider of media, content, connectivity and data analytics to markets across air, sea and land. The Chapter 11 case number is 20-11835.

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