Intelsat SA Seeks California Chapter 11 Bankruptcy Protection Ahead of Spectrum Auction
Amid the raging COVID-19 pandemic, several companies have been forced to seek bankruptcy protection to avoid creditor actions. While most of the latest cases have been directly caused by the government action to prevent the spread of the deadly pandemic, a significant number of bankruptcy cases are not directly related to the COVID-19.
In a last-ditch move to save its assets from creditor actions, Intelsat SA opted to file for Chapter 13 bankruptcy late Wednesday. The indebted satellite company opted to seek California bankruptcy protection after falling short of funding required to provide airwaves to wireless operators.
Before filing for California bankruptcy protection, the company was set to participate in a future wireless-spectrum auction by the government. The company, however, fell short of required funds after being weighed down by almost $15 billion debt to creditors.
The forthcoming auction involves a swath of spectrum currently in use by satellite operators, which the Federal Communications Commission (FCC) plans to repurpose for 5G networks.
A successful auction, though financially burdening, could spell the difference between the company’s doom and prosperity. If the bankruptcy claim is approved, the company will be able to participate in the forthcoming auction, which could boost its financial standing.
While announcing the new development, the company also cited the economic slowdown affecting several markets as a result of COVID-19 as being one of the causes.
The company also announced that it planned to continue its everyday operations, after securing and committing up to $1 billion new funding in the form of debtor-in-position. If the courts also approve of this move, the company will be able to run its operations normally while it proceeds with its bankruptcy case.
Under Chapter 11 bankruptcy that Intelsat SA is seeking, a company has to reorganize its debts to creditors with a plan subject to the approval of the courts. Since the company’s operations will not be crippled as a result of the bankruptcy, it can continue with its operations as long as it designs strategies to meet its debt reorganization goals agreed upon by both the creditors and the bankruptcy court.