Bankrupt Intelsat Buys Gogo In-Flight Wi-Fi Business for $400 Million
Deal is being funded by a $1 billion bankruptcy loan that Intelsat is using for its chapter 11 restructuring
Satellite operator Intelsat SA continues to expand despite filing for bankruptcy earlier this year to address billions of dollars in debt, agreeing to purchase the in-flight broadband business of Gogo Inc. for $400 million.
The acquisition announced Monday is being funded in part by the $1 billion bankruptcy loan Intelsat is using during its chapter 11 proceedings, the companies said. Intelsat said it has support from lenders funding its chapter 11, a group of investors that includes Apollo Global Management LLC, Fidelity Management & Research and BlackRock Inc.
Intelsat, based in McLean, Va., is a major satellite operator and one of the largest providers of broadband service to airline and cruise-ship customers. Although consumer travel has declined significantly this year because of the coronavirus pandemic, Intelsat Chief Executive Stephen Spengler said consumer demand for in-flight connectivity is expected to continue to grow over the next decade. Gogo is available on more than 3,200 aircraft, Intelsat said in court papers.
The fact the company can execute the acquisition during a financial restructuring in chapter 11 “speaks to the strength of our underlying business, our vision for the future, the commitment of key Intelsat stakeholders,” Mr. Spengler said.
The transaction is expected to close before the end of the first quarter of 2021, subject to regulatory approvals and customary closing conditions, Intelsat said.
Intelsat’s acquisition of Chicago-based Gogo’s in-flight business will expand its consumer offerings. Commercial airlines are increasingly using the quality of their in-flight internet service to differentiate themselves from competitors, Steven Zelin, a partner at PJT Partners LP, which has been retained by Intelsat, said in a declaration.
Intelsat filed for bankruptcy protection in May, weighed down by $14.5 billion in debt and about $1.13 billion in annual debt service payments. The company has said the restructuring is likely to significantly reduce its debt load.
Aside from addressing its balance sheet, the chapter 11 filing was also intended to help Intelsat take advantage of a planned auction of a swath of spectrum currently being used by satellite operators that the Federal Communications Commission wants to be repurposed for 5G networks.