PARIS — Commercial launch services provider Sea Launch Co., which has been in Chapter 11 bankruptcy reorganization since June 2009, expects to return to flight by mid-2011 with a stripped-down cost structure that will allow the company to be profitable with no more than four or four-and-one-half missions per year, Sea Launch President Kjell Karlsen said.
The post-Chapter 11 Sea Launch will be 85 percent owned by a Russian company, Energia Overseas Ltd., and will have three launches — two for Eutelsat of Paris and one for Intelsat of Luxembourg and Washington — in its backlog.
In addition to removing its large debt load, which Karlsen said had been an unsustainable weight Sea Launch had carried since its creation in the late 1990s, the yearlong Chapter 11 bankruptcy proceeding has forced the company to operate with a minimum of personnel and other resources.
In a May 13 interview, Karlsen said Long Beach, Calif.-based Sea Launch will present its reorganization plan June 14 to the Delaware Bankruptcy Court handling the Chapter 11 case. If the court approves the reorganization plan, the company could exit bankruptcy by September.
Exiting Chapter 11 proceedings is made easier when all major creditors back the reorganization, but their approval is not indispensable. If the court concludes that Sea Launch’s reorganization gives the company a reasonable chance of returning to operations without slipping back into bankruptcy, it can approve the reorganization.
Karlsen said that in Sea Launch’s case, all the major creditors agree that the company is worth more as an active commercial launch provider than if its assets were sold at auction and the company dissolved.
In a submission to the court, Sea Launch said creditors that hoped an auction would result in a large cash payment would almost certainly be disappointed. Among other costs, Sea Launch said, technology-transfer regulations governing space launch hardware likely would sharply reduce the amount of cash coming out of an asset sale.
In addition to its shareholders — Boeing of the United States, Aker of Norway, RSC Energia of Russia and Yuzhnoye and Yuzhmash of Ukraine — Sea Launch creditors include several of its customers. These include satellite operators Sirius XM Satellite Radio, SkyTerra and Hughes Communications of the United States, and SES and Intelsat, both of Luxembourg.
These companies made deposits to Sea Launch and, under the proposed reorganization, will be only partially reimbursed, if at all. These and other unsecured creditors of Sea Launch will together have a 15 percent ownership of the new company, with Energia Overseas Ltd., whose principal owner is space hardware builder RSC Energia of Korolev, Russia, holding the remaining 85 percent stake.
Energia provides the upper stage for the rocket Sea Launch uses to launch heavy commercial telecommunications satellites from a floating platform on the equator in the Pacific Ocean.
Sea Launch and Energia have told the Delaware Bankruptcy Court that Energia Overseas Ltd. has agreed to invest $140 million to pull Sea Launch out of Chapter 11 and back into commercial service.
Sea Launch said Energia Overseas Ltd. has also agreed to provide Sea Launch with $200 million in working capital to get back into its launch business.
Karlsen said Sea Launch, once out of bankruptcy, will be able to keep its operating costs between $45 million and $50 million per year.
He said the company expects to continue launching from its Pacific Ocean location in international waters and will not, at least for now, seek to relocate its launch site to U.S. territorial waters. A relocation could make it easier for Sea Launch to be classed as a U.S. rocket and thus be eligible to bid on U.S. civil-government business.
Karlsen said it was still unclear whether the new Sea Launch, as a Russian-owned company, would have access to Russian government launches. He said Sea Launch hopes to use Energia’s long relationship with NASA as a major supplier to the international space station to generate new business beyond Sea Launch’s current dependence on the commercial satellite telecommunications market.
Up to now, no launch service anywhere has been able to survive without having at least one government as a regular customer and financial backer.
