After almost 18 months, Sea Launch has finally exited Chapter 11 bankruptcy protection with Energia Overseas Limited (EOL) the company’s new majority owner.
Under the terms of the court-approved Plan of Reorganization, Sea Launch S.a.r.l., the successor…
After almost 18 months, Sea Launch has finally exited Chapter 11 bankruptcy protection with Energia Overseas Limited (EOL) the company’s new majority owner.
Under the terms of the court-approved Plan of Reorganization, Sea Launch S.a.r.l., the successor entity to Sea Launch, will be responsible for corporate functions and US-registered Energia Logistics Ltd will assume management of rocket assembly and satellite integration operations. Both will be based at the company’s existing headquarters in Long Beach, California.
A Moscow-based affiliate of EOL will manage the supply chain operations of all CIS-based primary and second-tier suppliers for the Sea Launch system, including the Zenit-3SL rocket. One of the main reasons for Sea Launch filing for bankruptcy protection back in June 2009 was a crisis in the hardware supply chain of its Russian and Ukrainian suppliers that meant it could not meet its launch manifest.
Sea Launch’s president and general manager Kjell Karlsen, and CFO Brett Carman will retain their positions in the reorganised company with new executives to be added to the Sea Launch team as it returns to full flight operations.
Having secured approval from Bankruptcy Court Judge Brendan Shannon on 27 July 2010, the reorganisation plan was subsequently cleared by the Committee on Foreign Investment in the United States (CFIUS) on September 8, 2010. With Boeing having transferred the necessary operational licences to the new owners, the process was complete.
Energia will own 95% of the restructured Sea Launch with the remaining 5% held in a trust for previous owners Boeing (just over 3%) and the Norwegian engineering company Aker (almost 2%). Energia is investing over US$150m into Sea Launch, US$110m of this, which is being paid in two instalments, will be a direct investment into the company to help bring it back to operational readiness and the remainder to satisfy creditor requirements and for the DIP financing.
“We are thrilled to have successfully emerged from Chapter 11 with a solid financial structure and a healthy manifest of future launches,” said Karlsen. “Completing this transaction will represent a significant accomplishment in the final steps toward re-entering the market as a strong and competitive commercial launch service provider. We are now planning for our return to launch operations in 2011.”
Dennis Shomko a spokesman for EOL, added: “We had an opportunity to systematically analyze all the existing processes and operations, both internal and external, and as a result, we are talking about an overhaul of the business at all levels. For customers, that means transparency, reliability and predictability.
“We are confident that we can deliver a competitive level of business comfort to them, while ensuring that our suppliers are managed appropriately.”
Sea Launch is currently conducting maintenance of all launch related systems, including the Sea Launch Commander ship and Ocean Odyssey launch platform. The first Land Launch mission, Intelsat-18, is slated for the first quarter of 2011, while Sea Launch expects to return to flight in Q3 2011.
Jefferies continues to advise Sea Launch., as do Alston & Bird LLP and Chris Picone of Buccino & Associates. Energia Overseas Limited is being advised by Salans LLP and the UK aerospace consultant Avicon.
Boeing to seek credit guarantee recompense
Prior to the Chapter 11 filing, Boeing Commercial Satellite Company (BCSC) was the largest shareholder in Sea Launch with a 40% stake, the remainder being held by Energia (25%), Norwegian shipping company Aker (20%), PO Yuzhnoye Mashinostroitelny Zavod of Ukraine (10%) and KB Yuzhnoye of Ukraine (5%).
As part of its ownership, Boeing and Aker provided a credit guarantee on approximately US$448m of Sea Launch’s indebtedness. Following the bankruptcy filing and subsequent default, Boeing paid the entire US$448m due under the guarantee.
The aerospace giant claims that it has rights to reimbursement from Sea Launch and its partners so that it contributes no more than its proportional ownership percentage (40%) of the guarantee payment obligations, equivalent to US$179m. To that end, backing September 2009, Aker executed a promissory note which obligates it to pay Boeing US$122m in three payments. The final payment of this, worth US$42m, is due in Q4 2010.
To recover the remainder, Boeing filed Notice of Arbitration with the Stockholm Chamber of Commerce in October 2009 seeking reimbursement from the other Sea Launch partners. On 7 October 2010, the Court ruled that it lacked jurisdiction to hear the matter. Boeing is now evaluating its options with regard to an appeal or further action.
The company’s claims do not stop there, however. Another result of the Sea Launch bankruptcy was that a US$523m loan provided by BCSC also became repayable by Sea Launch. Boeing claims that the launch company’s Russian and Ukrainian Sea Launch partners collectively have guaranteed portions of this loan totalling 40% of the total amount, US$209m. This means that Boeing claims to be owed approximately US$356m from the Russian and Ukrainian shareholders and states that it “intends to pursue vigorously all of our rights and remedies against the Russian and Ukrainian Sea Launch partners with respect to these amounts.”
While the bankruptcy reorganisation plan effectively cancels all Boeing’s claims against Sea Launch, the company states that it would still be entitled to pursue reimbursement from the other Sea Launch partners, after applying any distributions received from Sea Launch.
