Objections raised to Global Eagle reorganization plan

As Global Eagle presses forward in its efforts to emerge from Chapter 11 bankruptcy protection the company faces new challenges. More than 10,000 contracts are expected to the terminated through the process, nearly all of them without compensation to the other party. And some of those filed objections to that plan. Moreover, a broader objection to the overall plan was filed, suggesting that the bankruptcy exit plan “fails to provide the Debtors’ estates with sufficient consideration for certain material unencumbered assets that are not collateral.”

Among the companies filing objections to the dismissal of their debts are several content and technology partners to Global Eagle, including:

• SES filed a claim for $3.36 million as part of a contract for eight 36 MHz Ku-band transponders on the AMC-1 satellite covering North America and Hawaii
• Fox News claims more than $850,000 due for providing the Fox News and Fox Business channels to the company for consumption over the past six months
• An $8 million payment is planned to Intelsat, though the satellite operator insists this does not cover the full debt owed
• Telestra claims $195k due for content, objecting to the $0 it is slated to receive per the court filings
• Boeing claims $585k through Q1 2020, and additional accrued royalties of unknown amount since then, though the plan does call for $535k of this to be paid off
• Panasonic Avionics is owed $75k from the US entity of Global Eagle and another $276k in the UK, with some open invoices dating back years; only $8,073 has been allocated to that debt
• Warner Music holds many open content contracts with GEE, with a proposed cure amount of $0
• CenturyLink shows $425k in open invoices for telecommunications services, with $265k pending for payment
• Sunbeam, a landlord of GEE, claims $318,000 in back rent
• Broward County, Florida is seeking payment of at least $125,000 in property taxes and interest

There is a problem with these objections, however. No one else wants to buy Global Eagle. The company’s plan included an auction process whereby other bidders could acquire the operation. None participated. Only the Stalking Horse Bidder is in play.

The broader objection filed by the debtors could see the courts rule that some asset valuations must be reconsidered (or, per the objection, considered at all). This could raise the price of the deal and bring additional funds in to help cover some of these open contracts. Indeed, this is precisely what the Committee of Unsecured Debtors is asking for:

Committee respectfully submits that the Court should approve the Sale to the Stalking Horse Bidder only if the terms of the Stalking Horse Agreement are revised to (a) provide for the payment of fair cash consideration for the Unencumbered Assets, with such consideration to be distributed to unsecured creditors pursuant to a confirmed chapter 11 plan, and (b) ensure that the Debtors are able to satisfy all allowed administrative expenses and priority claims following the consummation of the Sale.

We have seen similar exit plans derailed in the recent past. Just last month LATAM‘s plan was rejected as being too generous to the new owners and made without independent, objective valuations. The objections here are similar.

And we will find out on Thursday whether the claims are strong enough to derail the company’s plans.