Debt-laden maritime satellite communications group Speedcast International has voluntarily entered into United States Bankruptcy Code Chapter 11 protection
This will allow its management to restructure the company’s finances as debt has ballooned following a half-decade of mergers and acquisitions, while revenues have been sunk by the coronavirus pandemic.
Chapter 11 petitions were filed on 23 April on behalf of Speedcast International and certain US and international subsidiaries.
This followed the company receiving a commitment for up to US$90M in new money in debtor-in-possession financing from the holders of Speedcast’s outstanding term loan and revolver debt to keep its operations going.
Speedcast said those funds, combined with its existing cash flows, “will help to ensure it is able to meet its ongoing commitments to all stakeholders throughout the restructuring” process.
It expects to honour customer and employee commitments worldwide, and to pay suppliers in the normal course of business for all goods and services going forward. But its ability to do so was impacted by Covid-19.
Continuing maritime communications is vital as Speedcast provides critical telecommunications services to fleets worldwide through its VSAT and L-band connectivity.
“The decisive actions we announced are about strengthening our financial position through the proven legal framework the Chapter 11 process provides,” said Speedcast chief executive and executive director Peter Shaper.
He replaced Pierre-Jean Beylier, who stepped down in February 2020 as details of the debt mountain and reduced profits surfaced.
By the end of 2019, Speedcast had accumulated US$669M in debt through its acquisition strategy in the 2010s. At the end of March, Speedcast reported a net loss of US$459.8M for 2019, including US$413.8M worth of write-downs. Speedcast’s 2020 revenues and profits have been severely impacted by the coronavirus.
The company said financial restructuring under Chapter 11 will allow it “to overcome the near-term headwinds it is facing as a result of pressures on its customers’ businesses”.
Revenues have been lost as Speedcast’s cruise line customers halted activities and energy companies cut spending as oil prices crashed to zero in April due to a slump in demand and surplus of supply.
These dynamics made it impossible for Speedcast to complete its planned equity raise, or any recapitalisation transactions, outside of the court-supervised Chapter 11 process.
“We are confident we will maximise the full potential of our expanded platform as a result of the actions we are taking now to align our balance sheet strength with our clear industry leadership,” said Mr Shaper.
“We fully expect that our customers and employees, among other stakeholders, will see no change in their interactions with our company as a result of this filing.”
He continued “We expect to be a stronger business partner and employer as a result of the additional financing our existing lenders have committed, based on their strong belief in our go-forward potential.”
Speedcast intends to continue its global operations uninterrupted. It will work with creditors and other stakeholders to develop a reorganisation plan that specifies how the company will reduce its debt and gain access to new sources of liquidity.
Its shares will remain suspended from trading until at least the end of the Chapter 11 process.
Speedcast started building a significant satellite communications business in Australia and Pacific areas in 2014 by acquiring Australian Satellite Communications, Pactel International and SatComms Australia. It then purchased NewSat’s teleport and satellite services in Australia, Hermes Datacomms and Geolink Satellite Services and then Singapore-based ST Teleport.
It continued its mergers, by acquiring Cyprus-based Sait Communications in 2015. It entered the cruise ship sector by purchasing European broadband provider WINS in 2016, and then acquired Harris CapRock, with its large cruise and offshore sector presence, in a US$425M deal.
Speedcast became one of Inmarsat’s largest distribution partners with organic growth and acquisitions and then in 2018 it became a leading communications provider to Maersk group and US government agencies through its US$134M Globecomm acquisition.
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