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May 1, 2020 – The Court hearing the OneWeb Global Limited cases issued an order authorizing the Debtors to (i) access $10.0mn of new money debtor-in-possession ("DIP") term loans being provided initially by SoftBank, (ii) roll-up $30.0mn of prepetition debt and (iii) use cash collateral [Docket No. 121].
The present $10.0mn of financing is part of an expensive (12.5% interest plus at least 2% in fees) and tightly controlled $300.0mn DIP financing package which will become accessible in four stages; with each stage including a modest injection of new money necessary to maintain operations and a roll-up of prepetition debt at a a ratio of 3-1 (ie $3 of prepetition debt rolled-up for every $1 of new money contributed), with the exception that at the second borrowing date there will be a one-off $90.0mn roll-up. The following is set to occur at each of the following four "Borrowing Dates:"
- First Borrowing Date: $10.0mn of new money term loans and $30.0mn of roll-ups upon issuance of this interim DIP order;
- Second Borrowing Date: $20.0mn of new money term loans and $60.0mn of roll-ups PLUS a $90.0mn roll-up upon receipt of one or more letters of intent, including in respect of "Obligor Spectrum Rights;"
- Third Borrowing Date: $25.0mn of new money term loans and $75.0mn of roll-ups upon receipt of binding purchase and sale agreement, including in respect of "Obligor Spectrum Rights;"
- Fourth Borrowing Date: $20.0mn of new money term loans and $60.0mn of roll-ups; this tranche only available post-sale if the Debtors need more time to obtain necessary regulatory approvals.
The only money available to the Debtors now (ie upon issuance of this interim DIP order) is $10.0mn, with each of the further three tranches dependent on tangible movement in the Debtors' sales process. The 2nd, $15.0mn tranche to be available upon the Debtors' receipt of letters of intent (albeit not necessarily binding) in respect of assets which must include their "Obligor Spectrum Rights," these including (i) the Ku-band and Ka-band spectrum usage rights filed with the International Telecommunication Union for the “L5” system licensed through the United Kingdom Office of Communications, held by WorldVu Satellites Limited and the “MCSAT LEO” system licensed through the French L’Agence nationale des fréquences, held by OneWeb Ltd.; and (ii) the United States Federal Communications Commission Authorization Granting Access to the U.S Market for the OneWeb NGSO FSS System, DA-FCC-17-77, granted on June 22, 2017.
The DIP motion states, “The Debtors seek authorization to enter into a super-priority senior secured delayed-draw debtor in possession credit facility in an aggregate principal amount of up to $300 million (the ‘DIP Facility’) to fund their ordinary course operating expenses and a competitive and robust process to consummate one or more sales involving assets or equity interests of the Debtors (such assets and equity interests, collectively, the ‘Assets’).
The Debtors’ largest pre-petition secured creditor, SoftBank Group Corp. (‘SoftBank’), has agreed to serve as the lead lender under the DIP Facility (in such capacity, the ‘Lead Lender’), while giving other holders of the Debtors’ 12.5% senior secured promissory notes (the ‘Notes’) the opportunity to participate in the DIP Facility on a pro rata basis according to their holdings of the Notes by notifying the Lead Lender on or before April 24, 2020. The lenders under the DIP Facility (the ‘DIP Lenders’) will fund up to $75 million in new money term loans (the ‘DIP New Money Loans’) in four tranches based on the Debtors achieving certain milestones in the proposed marketing and sale process for the Assets. In addition, for every new dollar that a DIP Lender funds under the DIP Facility, such lender will roll up three dollars owing on its (or its affiliates’) Notes into additional term loans under the DIP Facility (collectively, the ‘DIP Roll-Up Loans’ and, together with the DIP New Money Loans, the ‘DIP Loans’). The DIP Facility will allow the Debtors to immediately access $10 million upon entry of the proposed order approving such facility.
The Debtors, with the assistance of Guggenheim Securities, LLC (‘Guggenheim Securities’), the Debtors’ proposed investment banker, solicited proposals for debtor in possession financing from numerous potential lenders. However, the Debtors have few, if any, unencumbered assets, and thus junior financing was not available. Given that all potential third-party lenders would likely require the priming of the existing prepetition liens as a condition to advancing DIP financing to the Debtors and the Lead Lender—the controlling secured party with respect to the Notes—indicated that it would not consent to priming of its prepetition liens, the Debtors were unable to obtain DIP financing from other sources.”
Key Terms of the DIP Facility
- Borrower: OneWeb Communications Limited (“OWC”)
- Guarantors: OWG and the Subsidiary Guarantors (collectively with OWC, the “Obligors”).
- DIP Lenders: SoftBank will serve as the Lead Lender. Other holders of the Notes will have the opportunity to participate in the DIP Facility on a pro rata basis, based on their holdings of the Notes, by notifying the Lead Lender on or before April 24, 2020.
- DIP Administrative Agent: GLAS USA LLC.
- DIP Collateral Agent: GLAS Trust Corporation Limited.
- Borrowing Limits and Conditions: The DIP Lenders will provide up to $75.0mn in principal amount of New Money DIP Loans in the following tranches:
- Tranche 1: $10.0mn will be available after entry of the DIP Order and the satisfaction or waiver of other conditions precedent to the initial closing date;
- Tranche 2: $20.0mn (raised from $15.0mn as proposed in the Debtors' motion) will be available upon (i) receipt of one or more letters of intent (which may be non-binding) to acquire all or a portion of the Obligors’ assets, in form and substance reasonably satisfactory to the Lead Lender (such consent not to be unreasonably withheld), which letters of intent, taken as a whole, shall provide for the purchase and sale of not less than all or substantially all of the Obligor Spectrum Rights, (ii) the Lead Lender’s receipt of final approval from its investment committee to make such DIP Loans, and (iii) the satisfaction or waiver of other conditions precedent as set forth in the DIP Credit Agreement;
- Tranche 3: $25.0mn will be available upon (i) the Lead Lender’s receipt of a binding agreement (in form and substance reasonably satisfactory to the Lead Lender, such consent not to be unreasonably withheld) providing for the purchase and sale of not less than all or substantially all of the Obligor Spectrum Rights, (ii) the Lead Lender’s receipt of final approval from its investment committee to make such DIP Loans, and (iii) the satisfaction or waiver of other conditions precedent as set forth in the DIP Credit Agreement; and
- Tranche 4: up to an additional $20.0mn (reduced from $25.0mn) will be available in the amounts, and at such times, as the DIP Lenders may determine, following the Court’s approval of the sale of some or all of the Obligors’ assets (but, in any case, including all or substantially all Obligor Spectrum Rights), to the extent necessary to achieve regulatory approvals to close such sale.
- Interest Rate: 12.5% per annum, paid-in-kind monthly so long as no Event of Default has occurred and is continuing.
- Default interest: 15.5% per annum.
- Fees and Expenses:
- Funding Fees: A fee in an amount equal to 2.0% of the aggregate principal amount of each borrowing of DIP New Money Loans will be payable as a condition precedent to such borrowing, and each such fee will be deducted and paid directly to the DIP Lenders from the gross proceeds of such borrowing.
- Expenses: All reasonable out-of-pocket expenses incurred by (i) the DIP Agents and their respective affiliates in connection with the preparation, negotiation, execution, delivery, and administration of the DIP Credit Agreement, (ii) the Lead Lender in connection with the foregoing matters, and (iii) the DIP Agents or any DIP Lender in connection with certain enforcement activities.
- Agency Fees: Fees payable to the DIP Administrative Agent and the DIP Collateral Agent in the amounts and at the times agreed under the fee letter or otherwise in writing between the parties.
- Maturity Date: Earliest to occur of:
- March 26, 2021;
- the effective date of a plan of reorganization;
- the consummation of a sale or other disposition of all or substantially all assets of the Debtors or all or substantially all of the Obligor Spectrum Rights, whether pursuant to section 363 of the Bankruptcy Code or otherwise;
- the date of acceleration of the DIP Loans and the termination of the DIP commitments and upon and during the continuance of an Event of Default; and
- the conversion or dismissal of these cases.
The Court scheduled a hearing to consider the motion for April 24, 2020, with objections due by April 17, 2020.
Prepetition Capital Structure
- In 2015, OneWeb raised approximately $500.0mn in equity financing primarily from strategic investors, including certain entities affiliated with Airbus Group, Inc., Hughes Network Systems, LLC, EchoStar Corp., Intelsat Corporation, Qualcomm Incorporated and Virgin Group Ltd.
- In December 2016, OneWeb raised an additional $1.2bn consisting of a $1.0bn investment from SoftBank Group Corp. (“SoftBank”) and a $200.0mn investment from certain of its existing investors.
- As of the Petition Date, OWG had 6,897,734 ordinary shares and 606,061 preferred shares outstanding.
- July 2018 Note Purchase Agreement: On July 12, 2018, the Debtors entered into a note purchase agreement (the “Original NPA”) with SoftBank, as administrative and collateral agent. Between July 2018 and January 2019, the Debtors issued notes to SoftBank under the Original NPA in an aggregate principal amount of $408.0mn.
- March 2019 Note Purchase Agreement and Senior Secured Financing: On March 18, 2019, the Debtors entered into an Amended and Restated Note Purchase Agreement (the “A&R NPA”) with Softbank, Banco Azteca, S.A., Institución de Banca Múltiple, Airbus Group Proj B.V., Qualcomm Technologies, Inc. and The Government of the Republic of Rwanda as the initial purchasers (the “Purchasers”), Global Loan Agency Services Limited, as administrative agent, and GLAS Trust Corporation Limited, as collateral agent.
Between March 2019 and October 2019, the Debtors issued to the Purchasers 12.5% senior secured promissory notes in an aggregate principal amount of $1,560,621,949.30 (the “Senior Secured Financing”). As of the Petition Date, there was approximately $1,733,121,855.82 (principal plus accrued interest) outstanding under the Senior Secured Financing.
About the Debtors
Prior to the Petition Date, OneWeb was in the process of deploying 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. Founded in 2012, OneWeb has spent the past eight years developing a low-Earth orbit (“LEO”) satellite constellation system and associated ground infrastructure, including terrestrial gateways (“Satellite Network Portals”, or “SNPs”) and end-user terminals, 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 (the “OneWeb System”).
OneWeb’s business consists of the development of the OneWeb System, including the development of next generation, small-satellites being mass produced by a joint venture, and associated ground infrastructure, including operations centers, ground control facilities, SNPs, and various end-user terminals for various markets. In order to operate the OneWeb System, the Company holds various authorizations and licenses, including for the use of Ku-band and Ka-band radio-frequency spectrum on a global basis, and domestic market access/services authorizations necessary for operating the satellites and associated ground infrastructure. Having already completed three successful launches of over 70 satellites between February 2019 and March 2020, 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.
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