Global Eagle files for bankruptcy protection

October 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

October 2020 Issue

Media and satellite Wi-Fi company Global Eagle Entertainment Inc. has filed for Chapter 11 bankruptcy protection at the US Bankruptcy Court for the District of Delaware.

The Los Angeles-based company, which has close to $1.1bn in debt, said around half a dozen of its lenders have agreed to form a joint entity that will acquire its main assets for $675m. The company had $630.5m in assets and 1115 employees at the time of its bankruptcy filing. Global Eagle said its future owners intend to provide a $125m credit facility as exit financing upon completion of its restructuring.

Shortly after the filing, Global Eagle announced that it received interim approvals from the Bankruptcy Court for the ‘First Day’ motions filed in relation to the company’s voluntary Chapter 11 petitions. These approvals will help ensure that the company’s day-to-day operations continue without interruption during the court-supervised process.

Global Eagle said it will continue serving customers throughout its bankruptcy proceedings as the process will have “no material impact on (our) global operations as the company continues to provide services to all of its customers in the ordinary course, before and after the transaction”.

The company expects to emerge from bankruptcy by the end of the year with $475m less debt. The company, which provides in-flight connectivity (IFC) to airlines and connectivity to the maritime market, has been hit hard by the COVID-19 pandemic which has significantly impacted the travel industry. The majority of the company’s airline and cruise line customers have drastically reduced or altogether stopped operations in several markets the company serves, hampering revenue, Global Eagle said. The company reported a $153m loss in 2019, and negative cash flows compounded by its debt.

“While we made important progress last year managing our cash flow and reducing operating expenses, we have been particularly impacted by COVID-19-related travel restrictions and demand declines in both airline and cruise end-markets,” said Joshua Marks, chief executive of Global Eagle. “We expect to emerge from this process with a stronger balance sheet, significantly reduced debt and substantial liquidity, well-positioned to continue supporting our global customers into the future.”

Following the Chapter 11 filing, the company announced that it had agreed upon a ‘stalking horse’ asset purchase agreement, and its assets will be acquired by a group of approximately 90 percent of its loan holders, led by lenders managed by Apollo Global Management, Inc., Eaton Vance Management, Arbour Lane Capital Management, L.P., Sound Point Capital Management, Mudrick Capital Management, and certain funds and accounts under management by BlackRock Financial Management, Inc. The proposed $675m deal will leave existing stockholders without compensation following the bankruptcy, according to Global Eagle.

Global Eagle plans to obtain $80m in debtor-in-possession (DIP) financing and expects this financing to provide liquidity to support its operations during the sale process.

“Global Eagle is a market leader in delivering in-flight and at-sea passenger experiences with entertainment, content and connectivity,” said Jeffrey Rosen, managing director with the credit business segment of Apollo. “While the company reports that it has been impacted in recent months by COVID-19, we believe it benefits from a blue-chip customer base, industry-leading partnerships and an innovative platform built through years of strategic investments in technology. We believe Global Eagle’s services will continue to be core to the passenger experience over the long term, and see significant opportunities ahead for the company to continue driving growth and innovation. We also have tremendous confidence in Josh and the management team’s ability to lead Global Eagle through the current environment and into the future, and look forward to working closely with them as we move forward.”

Richard Summerfield