Launch provider Sea Launch has entered into an agreement with AsiaSat for the launch of a satellite, most likely AsiaSat 7, between 2012 and 2014. The contract marks the resolution of AsiaSat’s claims as an unsecured creditor of Sea Launch and represents…
Launch provider Sea Launch has entered into an agreement with AsiaSat for the launch of a satellite, most likely AsiaSat 7, between 2012 and 2014. The contract marks the resolution of AsiaSat’s claims as an unsecured creditor of Sea Launch and represents the latter’s first launch contract since it announced the reorganisation plan that should see it emerge from Chapter 11 bankruptcy protection under a new owner, the Russian manufacturer RSC Energia.
Back in May 2006, the two companies signed a launch contract for the AsiaSat 5 satellite with the Asian satellite operator making initial payments of US$31.5m. However, following Sea Launch filing for bankruptcy protection in June 2009, AsiaSat entered into a separate launch contract with ILS for the launch of AsiaSat 5 and subsequently filed a claim for a refund for the amount paid to Sea Launch thereby making it an unsecured creditor.
Under the terms of the new contract, the price of the launch will be between US$105m and US$114m depending on when the launch will be made. Sea Launch will provide AsiaSat with credit for US$16.15m which will used to offset the applicable launch services price. The contract will be paid in stages the earliest of which will be paid in April 2011 if the launch is made in January 2012.
Kjell Karlsen, president and general manager of Sea Launch, told SatelliteFinance that the agreement represented a happy medium and the two companies have been seeking to strike a deal for some time.
As to Sea Launch’s other unsecured creditors, while Intelsat and Eutelsat continue to hold their launch contracts with the company, Karlsen said that HNS, Sky Terra and Sirius XM did not have the same launch needs and so a different arrangement will need to be made.
The contract with AsiaSat remains conditional upon Sea Launch’s plan of reorganisation being approved by the US courts and a hearing in the Bankruptcy Court in Delaware is scheduled for July 27, 2010.
Karlsen remains optimistic that the plan will be cleared, stating: “I expect it to pass. I have been watching the voting from the class three and four creditors over the last couple of weeks and it seems positive. Everyone is looking forward to Sea Launch returning to service.”
Karlsen added that if and when the plan is approved, the next step is for deal to get regulatory approval. Sea Launch has already been working on this for the past couple of months and on June 21 the company filed an application with CFIUS (Committee on Foreign Investment in the United States). Karlsen said that there is a thirty day approval process for the first gatekeeper after which the filing is either approved or goes to Congress, which would then take another 45 days or so. Karlsen expected the Sea Launch – Energia transaction to be passed onto Congress.
During this period and afterwards, the company also needs to transfer a number licences from Boeing to the new owners. Karlsen said that the process continues to go smoothly and that once it is eventually completed, the company hopes to announce a number of new launch contracts.
He added, “We are ramping up this fall and once we get the necessary approvals, the next step is to conduct maintenance on the Odyssey launch platform. We are still on course for a return launch in the third quarter of 2011.”
The primary reason as to why Sea Launch filed for bankruptcy protection was the collapse in the hardware supply chain necessary to keep to its schedule of Zenit flights. Being as Energia is the prime contractor for the Zenit 3SL, such issues are unlikely to be repeated when it takes over.
Karlsen added that the new owner will also provide Sea Launch with a working capital facility that will enable it to pay its suppliers even if payments from its customer contracts have not been processed. He added that once Sea Launch emerges from Chapter 11, the company plans to operate on a debt free basis and will not look to generate capital through any asset backed financing.
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.
