ProtoStar’s Bondholders Unscathed by Bankruptcy

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The Chapter 11 bankruptcy of satellite operator ProtoStar Ltd. and the subsequent liquidation of its assets through an auction of its two in-orbit satellites may have been a disaster for the company’s equity owners but turned out to be just about painless for ProtoStar’s bondholders, according to Yuri Brodsky, a director at investment bank UBS’s media and communications group.

UBS advised ProtoStar during the Chapter 11 and satellite auction process. The two satellites, young and healthy in orbit, were sold in 2009 for a combined $395 million to satellite fleet operators SES and Intelsat in separate auctions overseen by the U.S. bankruptcy court handling ProtoStar’s estate.

Intelsat, which bested a field of 12 bidders, took ownership of ProtoStar 1 for $210 million, a price that was above par for the bondholders in that satellite. “Bondholders were made whole” in this transaction, Brodsky said. SES’s purchase of ProtoStar 2 for $185 million was “close to par,” he said.

Brodsky said the lesson is that “when assets are fungible, it lends further support for the value” in the fixed satellite services market.