Satmex’s U.S. creditors remain willing to advance the bankrupt satellite-fleet operator up to $55 million in cash to permit the launch of a new, already-built satellite in early 2006 despite the fact that Satmex’s bankruptcy proceedings will be conducted in Mexico, and not under a U.S. court’s jurisdiction, the creditors’ principal representative said.
Mitchell A. Harwood, managing director of the investment bank Evercore Partners of New York, which represents Satmex’s U.S. creditors, conceded that the U.S. creditors had lost the battle of court jurisdiction. They had wanted to force Satmex to file for bankruptcy protection in the United States.
But he said they had nonetheless secured enough U.S. court backing to enable them to press their case with Satmex in the future, if the Mexican government’s handling of the Satmex bankruptcy rides roughshod over the interests of the U.S. creditors.
For the moment, Harwood said, the U.S. creditors are willing to help salvage Satmex with cash to enable the company to finance the insurance premium and other launch-related costs of the Satmex 6 satellite, which has been in storage since October 2003, when Satmex ran out of cash.
“The financing is ready for them if they want it,” Harwood said in an Aug. 4 interview. “The Mexican government is not unaware that our interests and its interests should be the same with respect to Satmex.” But should things go badly in Mexico, he said, the U.S. debtors reserve the right to seek a U.S. court order to attach a lien against Satmex’s U.S. revenues.
Satmex generates nearly half its revenues through the sales of satellite services to U.S. companies. In 2004, satellite data-services provider Hughes Network Systems of Germantown, Md., was Satmex’s biggest customer, accounting for 28 percent of Satmex’s $71.7 million in revenues.
Harwood said that the U.S. Bankruptcy Court for the Southern District of New York, which reviewed the Satmex case before accepting July 29 that Mexico would take the lead in the proceeding, left the door open for future action by the U.S. creditors if Satmex or the Mexican government do not proceed in a straightforward manner.
U.S. creditors, who hold most of the debt of Satelites Mexicanos, S.A. de C.V., in late May, had tried to force the company into a Chapter 11 U.S. bankruptcy filing. The Mexican government responded that Satmex, in which the government has a 25 percent equity stake, is a Mexican affair to be resolved in a Mexican court.
Satmex management appeared to side with the U.S. creditors in a June 30 filing with the U.S. Securities and Exchange Commission (SEC). A bankruptcy procedure in Mexico, the company said, “may take significantly more time and be significantly less predictable than a reorganization case under U.S. laws.”
Satmex operates two telecommunications satellites — Solidaridad 2, which was launched in 1994 and is expected to continue operating for another 4.4 years; and Satmex 5, launched in 1998, which has an estimated nine more years of in-service life.
Both satellites have suffered in-orbit problems, and the Satmex 5 satellite is at risk of losing both its primary and backup electric-propulsion systems. Satmex 5, a Boeing 601 satellite model, is one of several Boeing-built satellites launched in the late 1990s whose xenon-ion propulsion system’s (XIPS’s) on-board power units were defective.
In May, the backup XIPS on Satmex 5 began performing defectively, forcing the company to return to the primary XIPS. If this one fails, Satmex would be able to operate for 3.7 years using its chemical-propellant system, according to Satmex’s SEC filing.
The shaky status of these satellites, plus their relatively limited geographic coverage and broadcasting power, have made the launch of Satmex 6 “critical to our ability to increase cash flows and improve our financial position,” Satmex said in the SEC filing.
Satmex and its shareholder and supplier, Loral Space and Communications of New York, in late June agreed to resolve a series of payment disputes to permit Loral to return Satmex 6 from its French Guiana launch site to Loral’s Palo Alto, Calif., manufacturing plant to be recertified.
A Mexican court must approve the Loral-Satmex deal before Satmex 6 is moved. If approval is granted quickly, Satmex 6 could be launched in early 2006, according to Satmex and Loral.
Satmex and the Arianespace commercial-launch consortium of Evry, France, continue to discuss possible launch dates aboard an Ariane 5 ECA rocket, a new version of Ariane 5 that has made only one launch, in February.
Satmex also is weighing the option of transferring Satmex 6 to Sea Launch LLC of Long Beach, Calif., whose Zenit-3SL vehicle operates from a platform in the Pacific Ocean. Arianespace and Sea Launch have a mutual-backup agreement, and Satmex officials are weighing whether to switch to Sea Launch to guarantee an early launch for Satmex 6. The Ariane 5 ECA launches two satellites at a time, meaning Satmex’s launch would depend in part on Arianespace finding a compatible co-passenger.