Tue 03/09/2021 14:56 PM
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Relevant Documents:
Convertible Noteholders Response
SES Response
Jackson Crossover Group Statement
Ad Hoc Equity Group Reservation of Rights

Today the ad hoc group of Intelsat parent debtor convertible noteholders and former C-Band Alliance partner SES Americom objected to the debtors’ motion to adjourn their Federal Communications Commission accelerated relocation payment standing motions from March 17 until an anticipated plan confirmation hearing on June 14. The convertible group did, however, file a notice agreeing to adjourn the hearing on its Intelsat Jackson and LuxCo guarantee claim objections until June 14. Continue reading as our Americas Core Credit team analyzes the Intelsat Jackson crossover group noteholders attack on the value allocation plan and Request a Trial for access to the linked documents as well as our analysis and reporting on hundreds of other stressed, distressed and performing credits.

A hearing on the debtors’ scheduling motion is set for tomorrow, Wednesday, March 10, at 11 a.m. ET.

Separately, the ad hoc Intelsat Jackson crossover group represented by Jones Day, which claims to hold more than 74% of the Intelsat Jackson senior notes, filed a statement supporting the debtors’ motion and asserting that the arguments of the convertible group and SES regarding entitlement to $4.87 billion in relocation payments are “not colorable” and “meritless.” However, the crossover group adds that it opposes the debtors’ plan because it allocates value to creditors of the Intelsat parent entities, such as Intelsat SA, without paying the Intelsat Jackson senior notes in full, including interest and other charges.

According to the crossover group, the plan “improperly diverts hundreds of millions of dollars of value away from Jackson Holdings (and its subsidiaries) to fund distributions to creditors of out-of-the-money equity holders, even though Jackson Holdings’ creditors are not being paid even close to in full.” The accelerated relocation payment standing motions “would be the least of the issues that would need to be litigated” at confirmation, the group adds, “given the patently inappropriate treatment proposed for Jackson Holdings’ unsecured creditors in the Debtors’ Plan.”

For their part, both the convertible group and SES maintain that their standing motions raise gatekeeping issues that must be resolved before solicitation on the debtors’ plan. SES specifically argues that the debtors’ scheduling proposal is “nonsensical, inefficient, and fundamentally unfair” because “creditors would effectively be voting on the Chapter 11 Plan, and formulating their objections to it, while in the dark as to which entity actually owns the right to the Accelerated Relocation Payments, and whether that is consistent with the Debtors’ proposed allocation of value” and “treatment of unsecured claims” at each debtor.

According to the convertible group, “[P]arties must know which estate owns an asset before negotiating or litigating over how its value should be distributed,” but the debtors’ scheduling proposal “would have the Court consider a plan that proposes how to distribute the value of the Accelerated Relocation Payments before ever determining which estate owns those payments.”

SES also maintains that the plan’s description of the allocation of the accelerated relocation payments and other value among the debtors is “threadbare and inadequate.” The crossover group asserts that the plan fails to adequately describe the “supposed settlements” underlying the plan’s allocation of value, while the convertible group argues that such settlements are “patently unreasonable” and “the product of a flawed ‘special committee’ process run by legacy board members operating under an inherent conflict of interest.”

“The Debtors’ game is clear,” the convertible noteholders assert: “They want to delay consideration of the Standing Motion until, they hope, the relief will be rendered moot by approval of inter-estate ‘settlements’ embodied in the Proposed Plan that abandon the Proposed Claims for zero value.” “By ‘adjourning’ the Standing Motion until plan confirmation,” the convertible noteholder group adds, “the Debtors receive what is, in effect, an indefinite stay of the Standing Motion and its underlying litigation until some later date of the Debtors’ choosing.”

SES further suggests that the debtors intend to use any adjournment to engage in “back-room negotiations” solely with the crossover group. By allowing the standing motions to proceed on March 17, SES argues, the court “can ensure that creditors of Intelsat US get a fair hearing on this crucial issue - instead of seeing their rights negotiated away in a back-room deal between parties with clear conflicts of interest.”

The convertible noteholder group alleges that the debtors have only “feigned plan negotiations” with it while focusing exclusively on the crossover group. Upon the filing of the standing motion, the convertible noteholder group says, “all ‘negotiations’ came to a halt.” The convertible group offered to agree to an adjournment of its standing motion for the parties to mediate, the convertible group says, but the debtors were willing to mediate “only after they reached a deal with other parties in interest.”

“The Debtors are, of course, free to negotiate with whomever they want, but they cannot seriously expect the Ad Hoc Group to accommodate their last-minute request to adjourn a properly scheduled motion they have known about for months, just so they have more time to cut a deal with another party,” the convertible group concludes.

The ad hoc Intelsat SA equity group filed a reservation of rights insisting that its motion for appointment of an official equity committee remain on the March 17 calendar.
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