🛰New Chapter 11 Bankruptcy Filing - OneWeb Global Limited🛰

OneWeb Global Limited

March 27, 2020

We have been complaining for months about how bankruptcy was getting boring. There are only so many retail, oil and gas, biopharma or mass tort cases to write about before things start to get really … and we mean REALLY … monotonous. And so a shout out to Softbank’s Masa Son: as always, you’ve supplied some much needed novelty to the mix! Amidst countless stories of one Softbank portfolio company after another getting a new directive, fresh discipline or retraded on deals (cough, WeWork), portfolio company OneWeb Global Limited and eighteen affiliates (the “debtors”) filed for bankruptcy.

As far as Softbank investments go, the debtors are SOOOOOOOO on brand. It is almost literally a “moonshot,” an uber-ambitious project aiming to deploy “the world’s first global satellite communications network to deliver high-throughput, high-speed, low-latency Internet connectivity services, having an ability of channeling 50 megabits per second, with a latency of less than 50 millisecond, and capable of connecting everywhere, to everyone.” Since 2012, the debtors have been developing a low-Earth orbit satellite constellation system and associated ground infrastructure “capable of delivering communication services for use by consumers, businesses, governmental entities, and institutions, including schools, hospitals, and other end-users whether on the ground, in the air, or at sea.” This means they have started mass producing small satellites, acquiring various authorizations and spectrum icenses (i.e., the use of Ku-band and Ka-band radio-frequency spectrum on a global basis) and domestic market access/services authorizations; they have also completed three launches of 70 satellites in the last year. “OneWeb was well on its way to growing its constellation to 648 satellites with the goal of beginning customer service demonstrations in late 2020 and providing full global commercial coverage by late 2021 or early 2022.” Right. Just like Uber Inc. ($UBER) is delivering autonomous cars and WeWork is sustainably spreading its community-first mission across the world. You have to hand it to Masa Son: the man has some vision. Some entrepreneurial spirit. Eventually, though, there has to be money to support the ambition.

Right. So, about the money. The debtors have raised a lot of it — no surprise considering the capital intensive nature of the business. The raises include:

• A $500mm equity raise backed by Airbus Group Inc. Hughes Network Systems LLC, Intelsat Corporation, Qualcomm Incorporated and Virgin Group Ltd.

• A $1.2b equity raise, $1b of which came from Softbank Group Corp. and the other $200mm from existing investors.

• A $408mm note issuance to Softbank as administrative and collateral agent.

• A $1.56b senior note issuance (and corresponding warrant issue) secured by substantially all of the debtors’ assets including share pledges and rights to radiofrequency authorizations. This issuance rolled-up the $408mm note.

In total, the debtors has over $1.73b in funded debt outstanding as of the petition date on top of the $1.7b of equity raised.

And yet it is in bankruptcy first and foremost because of liquidity issues. As a development stage company, it is what the venture capitalists would call “pre-revenue.” Worse than that, development is time-consuming and expensive and the build out of the debtors’ systems “exhausted [their] existing equity and debt financing.” Again, this is Softbank: massive cash burn is part of its playbook. We’ve all seen this movie before. There’s always tons of money until — poof! — suddenly there’s not. Since 2019, the debtors have been seeking investments from existing and new investors but nobody would bite. It seems that investors hesitated to throw good money after bad; it is also safe to presume that, by this point, a certain level of post-WeWork-fiasco Softbank taint burdened the process. Investors are leery of lighting good money on fire after bad.

Toss in COVID-19 and we’ve got ourselves a combustible situation. Per the debtors:

OneWeb had been hopeful to achieve an out of court solution to its deteriorating liquidity position. After several due diligence meetings during the first and second weeks of March 2020, the Company believed that it was going to be able to secure a long-term funding arrangement from existing shareholders. However, on March 12, 2020, as the markets began to feel the impact of COVID-19, OneWeb was notified that its current investors would not commit to a long term solution. On March 16, 2020, OneWeb entered into a term sheet for bridge financing to be consummated by March 26, 2020. On March 21, 2020, the Company was notified that the bridge financing offer was unavailable. Unfortunately, the anticipated funding opportunities OneWeb pursued were significantly and precipitously impacted by the COVID-19 pandemic and the resulting shuttering of the global economy. OneWeb, in an effort to preserve liquidity during these difficult social, political, and economic times, began shutting down nonessential aspects of its business in order to preserve the value of its existing assets.

Consequently, the debtors laid off 90% of their workforce and halted development. With the consensual use of Softbank’s cash collateral, the debtors filed chapter 11 “to provide them with the necessary breathing space to wait-out the current instability of the financial markets as they respond to COVID-19 pandemic and to adequately market and monetize their assets.”

Given the volatility currently in the market, there’s no telling how long they’ll have to wait.

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• Jurisdiction: S.D. of New York (Judge )

• Capital Structure: see above.

• Professionals:

  • Legal: Milbank LLP (Dennis Dunne, William Schumacher, Andrew Leblanc, Tyson Lomazow, Lauren Doyle)

  • Financial Advisor: FTI Consulting Inc.

  • Investment Banker: Guggenheim Securities LLC

  • Claims Agent: Omni Agent Solutions (*click on the link above for free docket access)

• Other Parties in Interest:

  • Softbank

    • Legal: Morrison & Foerster LLP (Gary Lee, Todd Goren)

  • Collateral Agent: GLAS

    • Legal: Arnold & Porter Kaye Scholer (Jonathan Levine)

  • EchoStar Operating LLC and Hughes Network Systems LLC

    • Legal: White & Case LLP (Thomas Lauria, Harrison Denman, John Ramirez)

  • Airbus DS Satnet LLC and Airbus Group Proj B.V.

    • Legal: Hogan Lovells US LLP (Ronald Silverman, Christopher Bryant, M. Hampton Foushee, Craig Ulman)
      

🌑New Chapter 11 Bankruptcy Filing - Murray Energy Holdings Co.🌑

Murray Energy Holdings Co.

October 20, 2019

Ohio-based Murray Energy Holdings Co. and its 90+ affiliated debtors are now part of a not-so-exclusive club: the Bankrupted Coal Company Club (the “BCCC”)! Unlike some more recent small(er) coal bankruptcy filings, this one is a behemoth: the debtors own and operate 13 active mines in Ohio, West Virginia, eastern and western Kentucky, Alabama, Illinois, and Utah*; their primary product is thermal coal used for electricity (though, with recent acquisitions, the debtors are also now in the steel-making business). To give you a sense of the magnitude of this company, here are some key figures:

• Produced 53mm tons of bituminous coal in 2018;

• Employs 5,500 people, including 2,400 active union members EXCLUSIVE of folks employed through the debtors’ partnership with soon-to-be-BCCC-member Foresight Energy LP ($FELP);

• Generated $2.5b in coal sales and $542.3mm of EBITDA in 2018; and

• Carries $2.7b of funded debt on balance sheet, $298mm of annual interest and amort expenses, AND $8b+ in actual or potential liability obligations under various pension and benefit plans. In 2018, the debtors’ statutory or CBA-related employee and retiree obligations totaled approximately $160mm. These are key factors that explain why, ultimately, despite every effort to hold out, this company capitulated into bankruptcy.

This is a story of unfettered expansion and spending, hubris, misplaced trust in new Washington on the part of Robert Murray, and utterly savage disruption.

The disruption side of the equation is compelling. Per the company:

“The thermal coal markets that Murray traditionally serves have been meaningfully challenged over the past three to four years, and deteriorated significantly in the last several months. This sector-wide decline has been driven largely by (a) the closure of approximately 93,000 megawatts of coal-fired electric generating capacity in the United States, (b) a record production of inexpensive natural gas, and (c) the growth of wind and solar energy, with gas and renewables, displacing coal used by U.S. power plants.”

Interestingly, this one statement ties together so much of what we’ve all been seeing in the restructuring space. Over the last several years, there have been a number of power company bankruptcies and through bankruptcy or otherwise, capacity has been cut considerably (indeed, FirstEnergy is a recipient of Murray Energy coal and undoubtedly took measures to cut back on coal supply). Fracking across the US has led to a deluge of natural gas — so much so that producers are flaring excess natural gas due to a lack of pipe infrastructure with which to transport it. Despite structural challenges, natural gas exports are on the rise. From the U.S. Energy Information Administration just yesterday:

“From January through June of 2019, U.S. net natural gas exports averaged 4.1 billion cubic feet per day (Bcf/d), more than double the average net exports in 2018 (2.0 Bcf/d), according to data in the U.S. Energy Information Administration’s (EIA) Natural Gas Monthly. The United States became a net natural gas exporter (exported more than it imported) on an annual basis in 2017 for the first time in almost 60 years.”

And as this odd illustration shows, the US is becoming increasingly dependent — in large part due to federal and state emissions standards — upon solar and wind for its electricity needs. The debtors highlight:

“…coal-fired installed capacity as a percentage of total installed capacity has fallen from 26 percent in 2013 to 20 percent in 2019, with coal-fired generation as a percentage of total generation falling from 35 percent in 2013 to 27 percent in early 2019. Natural gas and renewables installed electricity generation capacity in the United States as a percentage of total installed capacity has increased from 59 percent in 2013 to 67 percent in 2019, and natural gas and renewables generation as a percentage of total generation increased from 42 percent in 2013 to 48 percent in early 2019.”

YIKES. That is a DRAMATIC change. They continue:

“During its peak in 2007, coal was the power source for half of electricity generation in the United States and by early 2019, coal-fired electricity generation fell to approximately 27 percent. These challenges have intensified recently as (i) certain electric utility companies have filed for bankruptcy protection and others have sought, and received, subsidies for their nuclear generation capacity to avoid bankruptcy, at the expense of coal-fired facilities, (ii) domestic natural gas prices hit 20-year lows this past summer, and (iii) overall demand for electricity in the United States has declined two percent in 2019, further depleting demand for coal at domestic utilities.”

MAGA!!

The international story, though, ain’t much better, with the company noting a “perfect storm of negative forces” that includes:

“…low liquefied natural gas prices; a recent trade war driving Russia to increase exports; mild weather across the Northern Hemisphere led to a reduction in demand for heating in both Europe and Asia; higher freight costs; and a prolonged monsoon season in India which kept demand depressed while conditions cleared for a record eight months.”

As if all of that isn’t bad enough, the competitive landscape has been horrific and while we suppose its admirable to try and holdout to avoid the embarrassment and stigma of bankruptcy, that strategy clearly becomes untenable when literally every other competitor in the US has already joined the BCCC and stripped themselves of burdensome debt and pension obligations. The company acknowledges as much:

“…while Murray has historically been able to navigate the challenges of the coal marketplace, these rapidly deteriorating industry conditions have caused more than 40 coal companies to file for bankruptcy since 2008, with more than half a dozen major operators filing in the last year alone. These bankruptcies have affected thousands of workers across the United States, and they have left their mark on Murray. Competitors have used bankruptcy to reduce debt and lower their cost structures by eliminating cash interest obligations and pension and benefit obligations, leaving them better positioned to compete for volume and pricing in the current market, while Murray continued to satisfy its significant financial obligations required by the weight of its own capital structure and legacy liability expenses. As a result, Murray generated little cash after satisfying debt service obligations, paying employee health and pension benefits, and maintaining operations.”

That’s a quaint narrative but it’s also a bit misleading.

Several years ago, Bob Murray declared he would be the last man standing in coal. In the years since he expanded the company significantly and took on a lot of debt to do so: https://t.co/5HjPiUonzv pic.twitter.com/90h9IVyHig

— ⚡Taylor Kuykendall (@taykuy) October 29, 2019

While every other company was falling apart, Mr. Murray went on a shopping spree, snapping up Consolidation Coal Company, Foresight Energy LP (coming soon to a bankruptcy court near you), Mission Coal Company LLC, Armstrong Energy Inc., and certain Colombian assets. This undoubtedly led to increased integration costs and debt. During that time, the debtors deployed every capital structure trick in the book to extend maturities and kick the can down the road. That road has come to an end at the bankruptcy court doors.

Here is that sweet clean capital structure:

Man, that’s a beaut.

Rounding out the company’s extensive liabilities are the obligations to employees under CBAs and pension and benefit plans.

Pursuant to these CBAs, Murray contributes to three multi-employer retirement plans. If you want a sense of how employer-employee relations have changed since the 1970s, look no farther than the debtors’ obligations under what they’ve dubbed the “1974 Pension Plan.” Per the debtors:

“Following the large wave of chapter 11 filings in 2015 and 2016, more than half a dozen large U.S. coal companies collapsed into bankruptcy over the last several years and withdrew from the 1974 Pension Plan. When an employer withdraws, its vested beneficiaries remain in the 1974 Pension Plan and are referred to as “orphan” beneficiaries. The remaining contributing employers become responsible for the benefits of these orphaned participants who were never their employees. As a result, approximately 95 percent of beneficiaries who currently receive benefits from the 1974 Pension Plan last worked for employers that no longer contribute to the Plan. As of January 2019, 11 employers contribute to the 1974 Pension Plan, compared to over 2,800 in 1984. This has placed significant stress on the 1974 Pension Plan and the small number of contributing employers—Murray most of all. If Murray withdraws from the 1974 Pension Plan, the withdrawal liability could be $6.4 billion or more, with annual estimated payments of approximately $32 to $35 million in perpetuity.”

Whoa. And that’s just one plan: the company is also on the hook for others, not to mention $1.9b in other federally-mandated post-employment benefits, asset retirement obligations and environmental obligations.

Murray Energy has filed for bankruptcy. This is terrible if not surprising news for thousands of retired coal miners — Murray was basically the last big employer keeping their pension plan afloat. Now Murray will very likely try to shed pension obligations in bankruptcy court.

— Dave Jamieson (@jamieson) October 29, 2019

“Likely”?!?

The company has a restructuring support agreement with 60% of its “consenting superpriority lenders” and “consenting equityholders” (read: Robert Murray) that outlines the general terms of a path forward: a sale with the superpriority lenders as stalking horse bidder, DIP lender, and funder of administrative expenses. Those lenders committed to provide a $350mm DIP commitment. From here, the clock is ticking.

The debtors hope to have an auction within 135 days and plan confirmation within 195 days. And within 106 days the debtors want to have a solution their CBA/retiree problem or file a motion seeking to reject those agreements and modify those benefits.

Murray Energy, the largest coal company in the United States, filed for bankruptcy. If Murray rejects the UMWA pension plan obligations in Chapter 11 bankruptcy, the UMWA pension fund will be insolvent by 2020. Before last night it was projected to be insolvent by 2022.

— Senator Joe Manchin (@Sen_JoeManchin) October 29, 2019

There is, as with most cases, a “cooler talk” aspect to this filing: there’s the Kirkland-is-dominating-with-yet-another-coal-bankruptcy-representation-post-westmoreland-and-mission-coal-and-armstrong-energy-which-means-that-A&M-is-dominating-which-means-that-Prime-Clerk-is-dominating-and-what-the-f*ck-happened-to-Jones-Day-which-used-to-crush-coal-filings-with-Peabody-and-Alpha-Natural-but-now-seems-to-be-unraveling-narrative, but putting aside that inside baseball crap and how much frikken cash this case is going to print for all of the above, it’s the miners themselves — those guys who were in the depths of the earth (as distinct from the white-collar professionals who always talk about “the trenches” and “hard fought” negotiations) — who are very likely to get completely and utterly shafted here. As if getting misled or lied to by Mr. Murray — however good his intentions may have been — and Mr. Trump wasn’t enough, they’re now facing the very real possibility of losing the benefits that they worked especially hard to get. All while the professionals are billing $1650/hour. Bankruptcy is vicious.

To point here is the UMWA’s statement about the bankruptcy:

“Today’s filing by Murray Energy for Chapter 11 bankruptcy reorganization comes as no surprise. This day has been coming for some time.

Coal production in this country continues to decline, due to the glut of natural gas on the market and continued government preference for gas and renewable energy to replace coal-fired power generation. Combined with a recent severe reduction in coal exports, these factors delivered a one-two punch that an over-extended Murray Energy could not withstand.

Now comes the part where workers and their families pay the price for corporate decision-making and governmental actions. Murray will file a motion in bankruptcy court to throw out its collective bargaining agreement with the union. It will seek to be relieved of its obligations to retirees, their dependents and widows. We have seen this sad act too many times before.”

Let’s pour one out for the little guys.

*This number is contradicted in the bankruptcy papers. In one instance, the company’s new CEO indicates that there are 13 owned and operated mines; in another he says 18. Whatevs. What are 5 mines in the scheme of things (we’re kidding…WTF, y’all?). The company also owns and operates a mine in Colombia, South America.

• Jurisdiction: S.D. of Ohio (Judge Hoffman Jr.)

• Capital Structure: See Above

• Professionals:

  • Legal: Kirkland & Ellis LLP (James Sprayragen, Nicole Greenblatt, Ross Kwasteniet, Joseph Graham, Alexander Nicas, Mark McKane, Tricia Schwallier) & Dinsmore & Shohl LLP (Kim Martin Lewis, Alexandra Horwitz)

  • Financial Advisor: Alvarez & Marsal LLC (Robert Campagna)

  • Investment Banker: Evercore Group LLC

  • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • Prepetition ABL Agent: Goldman Sachs Bank USA

  • Prepetition FILO and DIP FILO Lender: GACP Finance Co. LLC

    • Legal: Sidley Austin LLP (Jennifer Hagle, Leslie Plaskon, Anna Gumport) & Frost Brown Todd LLC (Ronald Gold, Erin Severini

  • Prepetition Superpriority Agent: GLAS Trust Company LLC; DIP Administrative Agent: GLAS USA LLC; DIP Collateral Agent: GLAS Americas LLC

    • Legal: Wilmer Cutler Pickering Hale and Dorr LLP (Andrew Goldman, Benjamin Loveland) & Frost Brown Todd LLC (Douglas Lutz, A.J. Webb, Bryan Sisto)

  • Term Loan Agent: Black Diamond Commercial Finance LLC

    • Legal: Ropes & Gray LLP (Gregg Galardi) & Keating Muething & Klekamp PLLC (Robert Sanker)

  • 1.5L Notes Indenture Trustee: U.S. Bank N.A.

  • 2L Notes Indenture Trustee (‘20 and ‘21): The Bank of New York Mellon Trust Company N.A.

  • Ad Hoc Group of Superpriority Lenders

    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Adam Shpeen, James McClammy) & Frost Brown Todd LLC (Douglas Lutz, A.J. Webb, Bryan Sisto)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • Equityholders (Robert Murray)

    • Legal: Willkie Farr & Gallagher (Brian Lennon, Matthew Feldman)

  • Official Committee of Unsecured Creditors (Bank of NY Mellon Trust Company NA, CB Mining Inc., Joy Global, RM Wilson Co., UMWA 1974 Pension Trust, United Mine Workers of America International Union, Wheeler Machinery Co.)

    • Legal: Morrison & Foerster LLP (Lorenzo Marinuzzi, Todd Goren, Jennifer Marines, Erica Richards, Benjamin Butterfield)

    • Investment Banker: Moelis & Co. (William Derrough)