Sea Launch has filed a plan of reorganisation to the Delaware Bankruptcy Court that states the Russian manufacturer RSC Energia will purchase 85% of the company for US$140m to bring it out of Chapter 11 bankruptcy protection.
The remaining 15% of Sea…
Sea Launch has filed a plan of reorganisation to the Delaware Bankruptcy Court that states the Russian manufacturer RSC Energia will purchase 85% of the company for US$140m to bring it out of Chapter 11 bankruptcy protection.
The remaining 15% of Sea Launch’s equity will be owned by its unsecured creditors.
Energia, which is operating through its foreign joint venture Energia Overseas Limited, will also provide Sea Launch with access to a working capital facility of around US$200m.
This capital facility is run through an Energia subsidiary that orders the hardware necessary for flights of the Zenit rocket used for Sea Launch and Land Launch. In the event of Sea Launch needing extra capital related to hardware requirements, this subsidiary will dip into its facility to ensure that Sea Launch never again runs into the kind of supply chain difficulties that were the catalyst to entering Chapter 11.
Sea Launch President Kjell Karlsen told SatelliteFinance: “Since we filed for chapter 11 last year, the goal was always to attract senior investment to inject fresh equity into the company. Sea Launch will now go forward with no debt on its balance sheet. The US$450m external debt that was such a burden will not be there, which opens up the possibility of a small operating profit in the future.”
He said that there are likely to discussions as to whether 15% of Sea Launch’s equity is a sufficient stake for the non-secured creditors, but stated that is the size Sea Launch and Energia felt would satisfy most claims.
Sea Launch is now currently going through the necessary legal and regulatory channels to finalise its exit from Chapter 11. It will make its full disclosure in June, which will be followed by a 28-day period culminating in the Bankruptcy Court’s confirmation hearing. If all goes as anticipated, this could take place by the end of July.
On the regulatory side, Sea Launch is working closely with former shareholder Boeing on the transfer of licences to the new owner.
Energia took over the provision of US$30m debtor-in-possession (DIP) financing to Sea Launch from Space Launch Services (SLS) on May 4.
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.
As an existing shareholder and manufacturer of the Zenit rocket used by Sea Launch, Energia has always been the most natural fit to bring the company out of Chapter 11. This was made more likely when Boeing, said that it would provide no further funding after it was forced to pay US$448m to Sea Launch’s secured creditors when the company went into chapter 11 in June 2009.
Human spaceflight company Space Launch Services provided the vital DIP financing that kept the company going over the last year, and registered its interest in acquiring Sea Launch.
According to Karlsen, there was a third unnamed proposal alongside Energia and SLS. “When we laid out all these offers to the board it became pretty evident that the offer which promised the best outcome was Energia’s,” he said. “It represented the highest equity portion anyone was willing to take and the least risk. We were pleased we received two other proposals and we’d be happy to work with either company in the future.”
Karlsen said that Sea Launch will not alter its operational structure in any major way. It will still operate out of Long Beach in California, and the ocean going platform it uses to launch its rockets is still registered to the Sea Launch name.
The company is targeting a return to flight in Q1 2011 with a Land Launch contract for Intelsat. It hopes to restart Sea Launch flights in Q2 or Q3 of the same year.
An Energia Overseas Limited spokesperson said: “This transaction constitutes not only an EOL investment, but also an operational opportunity for experienced professionals in the US, Russia, Ukraine, Norway and UK to combine their efforts in returning this unique, international business to the commercial launch market,” said an EOL spokesperson. “The significance of maintaining a competitive launch alternative for the US and the international commercial satellite industry with Sea Launch should not be underestimated and we believe the satellite community will welcome these efforts.
“We understand this business, we understand the complexities and challenges and, most importantly, we know how to manage the processes. Therefore, it will be a win-win combination for all parties involved. For customers, this translates into Sea Launch continuing as a reliable partner for providing best-in-class satellite launch service. Implementation of the proposed reorganisation plan will result in a strong, sound and stable world-class corporation, allowing Sea Launch to offer its proven high quality and unmatched value. We look forward to fulfilling the regulatory requirements to return Sea Launch to operations.”
