PARIS — Satellite fleet operator SES has agreed to pay $185 million in cash for the in-orbit ProtoStar 2 satellite on condition that the U.S. bankruptcy court handling ProtoStar Ltd.’s Chapter 11 proceedings agrees that SES will receive $6.3 million in compensation if it is outbid by another company at the ProtoStar 2 auction, scheduled for Dec. 16, according to court documents.
The Delaware Bankruptcy Court has scheduled a hearing for Dec. 10 to determine whether to accept the ProtoStar-SES deal, which would effectively limit the ProtoStar 2 auction to bidders willing to pay more than $191.3 million.
One company that had been contemplating a bid for ProtoStar 2 said $185 million was at “the high end” of the expected ProtoStar 2 price range. This official said if the court accepts SES’s conditions, it might be viewed as equivalent to canceling the auction because few if any bidders are likely to enter a process where the minimum offer is so high.
ProtoStar sees it differently. In documents submitted to the court Dec. 9, ProtoStar says accepting SES’s terms will result in an auction “generating higher and better offers.”
ProtoStar has told the court that it had sought so called “stalking horse” bids from several prospective ProtoStar 2 buyers, but found none other than SES’s that met minimum-credibility tests.
ProtoStar says it agreed to pay SES a deal-breakup fee of 3 percent of SES’s guaranteed bid, or $5.55 million, plus $750,000 “for actual out-of-pocket expenses incurred in connection with the ProtoStar-2 sale process.”
ProtoStar had solicited stalking-horse bids in the run-up to the Oct. 29 auction of its other principal asset, the ProtoStar 1 satellite, which is also healthy and in orbit. None of the prospective bidders, including the eventual auction winner, Intelsat of Bermuda and Washington, agreed to play the stalking-horse role. As a result, 11 bids separated by millions of dollars were received.
ProtoStar says in its court filings that SES will back away from the $185 million auction guarantee unless it is granted the breakup fee and expense reimbursement. “Absent the proposed breakup fee, SES will not agree to act as the stalking horse and there is substantial risk that ProtoStar will not be able to realize the same value,” ProtoStar said.
An official with one company involved in the ProtoStar 1 auction in October said SES’s move is almost certain to reduce the number of ProtoStar 2 bidders, which in any event were not expected to be numerous given the particular constraints of the satellite.
ProtoStar 2, a Boeing 601HP model, was launched in May and is stationed at 107.7 degrees east longitude in geostationary orbit. It carries 27 Ku-band transponders and 13 S-band transponders. The S-band capacity is leased to Indostar and Indovision of Indonesia.
Moving ProtoStar 2 more than a couple of degrees from its current slot would risk the loss of the satellite’s Indonesian anchor customer. Because S-band is little-used for television broadcasts, ProtoStar 2’s new owner likely would have to abandon the S-band payload as a revenue source if the satellite were moved to another region.
SES already has its NSS-11 satellite stationed at 108.2 degrees and has said it wants to develop that orbital position for Ku-band services in East Asia. Moving ProtoStar 2 there would permit SES to retain the Indonesian S-band service.
Industry officials had said that, given SES’s natural advantage in the ProtoStar 2 auction, the bid price likely would be kept low even if other operators, including Asiasat of Hong Kong, had indicated interest in the satellite.
