Speedcast International files bankruptcy to strengthen balance sheet

By Caroline Salls

Pittsburgh, April 23 – Speedcast International Ltd. filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the Southern District of Texas after evaluating a variety of options to strengthen its balance sheet in ways that support its long-term growth and success, according to a company news release.

In conjunction with the bankruptcy filing, the company said it received a commitment for up to $90 million in new-money debtor-in-possession financing from the holders of its outstanding term loan debt, which combined with its existing cash flows, will help to ensure it is able to meet its go-forward commitments to all stakeholders throughout the restructuring.

A total of $35 million of the new-money facility is available on an interim basis.

In addition, the company said it is seeking approval of a two-stage “roll-up” of a maximum of $90 million of the $680 million owed under its pre-bankruptcy credit agreement to a second-out position in the DIP facility.

No other DIP financing terms had been filed as of Thursday afternoon.

Operations continue

None of the entities associated with Speedcast’s government business, including UltiSat, Inc., Globecomm Systems Inc. and all associated entities, are included in the Chapter 11 filings. The company said those entities are fully financially independent and continue to operate and generate enough cash flow to support their operations.

Speedcast said all entities, regardless of their status in the Chapter 11 process, are operating as usual. The company said it fully intends to uphold its commitments to its customers and employees, and to pay suppliers in the normal course of business for all goods and services delivered to any Speedcast entity from Thursday forward.

“The decisive actions we announced today are about strengthening our financial position through the proven legal framework that the Chapter 11 process provides – and we are confident we will be well positioned to maximize the full potential of our expanded platform as a result of the actions we’re taking now to align our balance sheet strength with our clear industry leadership,” chief executive officer and executive director Peter Shaper said in the release.

The release said a significant percentage of the company’s customers are in the maritime and oil and gas industries and have extended payment terms as they work to overcome significant industry pressures. In addition, Speedcast said the impact on its business was further exacerbated as the Covid-19 pandemic spread worldwide and halted activities for cruise line customers.

The company said these dynamics made it impossible to complete its planned equity raise – or any recapitalization transaction – outside of the court-supervised Chapter 11 process.

Speedcast plans to emerge from the process during the 2020 calendar year, and ideally hopes to have it completed by the end of August, the release said.

Debt details

According to court documents, Speedcast has $500 million to $1 billion in both assets and debt. As of Thursday, the company said it had $689.1 million in outstanding funded debt obligations consisting of $87.7 million under a revolving credit facility, $591.4 million in term loans and $10.6 million in outstanding letters of credit.

The company’s largest unsecured creditors are Intelsat Corp. of Dallas, with a $44.84 million supplier claim; Inmarsat Global Ltd., based in London, with a $23.43 million supplier claim; New Skies Satellites BV of the Hague, Netherlands, with a $3.07 million supplier claim; O3b Sales BV of the Hague, Netherlands, with a $3.03 million supplier claim; Thrane and Thrane A/S of Kongens Lyngby, Denmark, with a $2.71 million supplier claim; Asia Satellite Telecommunications Co. Ltd. of Hong Kong, with a $2.51 million supplier claim; Intellian Technologies USA, Inc. of Irvine, Calif., with a $2.07 million supplier claim; McKinsey & Co. Inc. of San Francisco, with a $1.95 million professional services claim; APT Satellite Co. Ltd. of Hong Kong, with a $1.8 million supplier claim; and Eutelsat Asia Pte Ltd. of Singapore, with a $1.77 million supplier claim.

Speedcast is advised by Weil, Gotshal & Manges LLP as global legal counsel and Herbert Smith Freehills LLP as co-counsel. FTI Consulting, Inc. is Speedcast’s financial and operational adviser. Moelis Australia Advisory Pty Ltd. and Moelis & Co. LLC are Speedcast’s investment bankers.

Speedcast is an Australia-based provider of remote communication and IT solutions. The Chapter 11 case number is 20-32243.

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