Global Eagle will restructure and recapitalize under Chapter 11 of the US Bankruptcy code. The inflight connectivity and content service provider secured agreement with holders of 90% of its senior secured first-term loans to pursue this path. As a result substantially all of the company’s assets are to be acquired for $675 million, reducing total debt by approximately $475 million. The deal also includes $80 million in fresh debtor-in-possession financing to ride out the current downturn. Global Eagle expects to continue normal operations uninterrupted through the process.
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. Our investors have been strong strategic partners with Global Eagle, we appreciate their continued support, and we believe this is the best path forward for our company and our customers, partners and employees.– CEO Joshua Marks
Speaking for the lenders, Jeffrey Rosen, Managing Director with the Credit business segment of Apollo, notes, “[W]e believe [Global Eagle] benefits from a blue-chip customer base, industry-leading partnerships and an innovative platform built through years of strategic investments in technology. We believe Global Eagle’s services will continue to be core to the passenger experience over the long term, and see significant opportunities ahead for the Company to continue driving growth and innovation.”
Not mentioned (for obvious reasons) are the major structural challenges tied to the maritime JV and the accounting mess from prior mergers that took years to untangle and saw massive write-offs through that time. How those deals are rebuilt and how the company chooses to reorganize those operations going forward will help determine the success of the coming Chapter 11 work.
While Global Eagle does not provide a firm timeline for the restructuring the company anticipates an exit before the end of 2020. That exit includes a $125 million exit facility which would include assumption or refinancing of the $80 million DIP funds.
All of these plans are subject to approval by the Court.
Satellite capacity debt
Running a worldwide(ish) inflight connectivity network requires satellite capacity and coverage spanning the globe. A review of the Chapter 11 filing suggests that Global Eagle’s exposure to the providers of those satellite services is significant. The Chapter 11 process will allow for the renegotiation of these contracts in a court-supervised process.
SES is the largest satellite-related claimant, coming in at $26.6 million. Intelsat follows at $9.75mm. Yahsat registers at $3.5mm while Hughes is owed $3mm and Telesat $2.5mm.
Global Eagle also owes antenna manufacturer Qest just under $2 million while on-board hardware supplier Kontron holds a claim of $439k.
The company faces a delicate balancing act of restructuring the deals while still maintaining the necessary service levels to provide for its airline and maritime connectivity customers. That the demand is lower today helps, but Global Eagle will need to ensure the ability to scale back up as needed remains.
Content licensing fees
The company’s other major debt obligations are to movie and recording studios for the content that is packaged and resold to airlines. BMG tops the list with $3.5mm outstanding. Lionsgate ($1.9mm), Sony ($1.2mm), Warner Music ($818k), Universal Music ($590k), and Fox ($548k) are some of the bigger names with debt outstanding to Global Eagle.
Others owed, too
A pair of airlines appear on the company’s top 30 unsecured debtors list. American Airlines is owed just over $1.1 million while the recent Turkish Airlines deal has a $435k exposure to the Technic group of that carrier.
Recently fired auditors KPMG are owed $1.3 million per the filings. Microsoft and Boeing hold a combined million dollars in outstanding debt as well.
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