Intelsat is seeking to acquire in-flight Wi-Fi and entertainment provider Gogo’s commercial aviation business in a transaction that would be valued as high as $500 million, according to sources. On Aug. 24, Intelsat filed
a motion seeking bankruptcy court authorization to enter into an unidentified proposed transaction and an amendment to its DIP credit agreement
to fund it.
The vertical acquisition would improve satellite utilization for Intelsat and enhance Gogo’s liquidity amid the Covid-19 pandemic, the sources said.
Intelsat CFO and EVP David Tolley said in a declaration supporting the motion that “the Target will provide strategic enhancements” to the debtors and “enhances the value of the Debtors’ estates for the benefit of all stakeholders.”
Gogo CEO Oakleigh Thorne on the company’s Aug. 10 second-quarter earnings call said
that several parties expressed interest in its commercial aviation business during the quarter and that the company had retained BDT & Co. as financial advisor to evaluate its strategic options for the business as part of a process formally launched this summer. He said Gogo has been in extensive discussions with multiple parties and feels “optimistic” that a deal may happen.
In the motion, Intelsat said it submitted a first-phase, nonbinding indication of interest to the seller on July 2 and submitted a second-phase, nonbinding indication of interest on July 27, subject to ongoing diligence. On Aug. 16 the seller granted Intelsat a two-week exclusive period during which the parties have been finalizing definitive documentation, Intelsat said. Intelsat seeks an expedited hearing on the matter to be held Monday, Aug. 31, at 1 p.m. ET. Intelsat said it anticipates completing negotiations “on or around” the Aug. 31 hearing date.
Intelsat said it has been coordinating with various notice parties in its cases - the U.S. Trustee, the official committee of unsecured creditors, the ad hoc group of prepetition parties, and the crossover ad hoc group of term loan lenders and noteholders. According to Intelsat, on Aug. 19 certain creditors within each of the ad hoc groups and the parentco creditors became restricted, and those restricted creditors now support the transaction.
In addition to the transaction, Intelsat seeks authority to enter into a related amendment to its DIP credit agreement. Intelsat states that although it “currently [has] investment capacity” under the agreement, it has “determined in [its] business judgment that it is prudent to increase the amount of funds available for investment purposes under section 10.5(s) of the DIP Credit Agreement ... that are necessary or appropriate to consummate the transaction.” The amendment provides that “the Purchase Price shall be funded by a secured intercompany loan and also provides the ability to raise additional financing to fund future working capital.” Intelsat also notes that the required lenders under the DIP order and DIP credit agreement have indicated that they support the investment amendment.
“Our intent to make a strategic acquisition is to take advantage of opportunities that can further advance our forward-looking vision and business strategy,” a spokesperson for Intelsat said in an emailed statement. Intelsat declined to comment further on the acquisition target or transaction terms.
Gogo did not immediately respond to a request for comment.