Sea Launch emerges from bankruptcy under Energia Overseas ownership

By Caroline Salls

Pittsburgh, Oct. 28 - Sea Launch Co., LLC completed its reorganization process and emerged from Chapter 11 bankruptcy on Wednesday, according to a company news release.

As previously reported, the plan was confirmed by the U.S. Bankruptcy Court for the District of Delaware on July 27.

As part of Sea Launch's court approved plan of reorganization, Energia Overseas Ltd. will acquire majority ownership in the reorganized company.

The successor entity, Sea Launch Sarl, will be responsible for corporate functions at its operations headquarters and will maintain some assets at Sea Launch Home Port in the Port of Long Beach in California.

Energia Logistics Ltd. will assume management of rocket assembly and satellite integration operations at the existing Sea Launch Home Port facilities, while a Moscow-based Energia Overseas affiliate will manage supply chain operations of all CIS-based primary and second-tier suppliers for the Sea Launch system.

The company said the Zenit-3SL launch system and its operations team will continue to support future launches.

According to the release, Sea Launch president and general manager Kjell Karlsen and chief financial officer Brett Carman, as well as some of the senior members of Sea Launch's executive management team, are transitioning to the new Sea Launch entity and will be joined by new professionals who will be added to the Sea Launch team as it returns to full flight operations.

Leading up to the closing of the Energia Overseas transaction, Sea Launch said it successfully completed a series of milestones in 2009 and 2010, followed by U.S. government review of the new ownership structure.

The transaction cleared the Committee on Foreign Investment in the United States on Sept. 8.

Under its exit commitment, Energia Overseas has agreed to provide a $155 million equity investment and a $200 million five-year revolving loan.

Interest on the revolver will be Eurodollar plus 300 basis points.

Creditor treatment

Treatment of creditors under Sea Launch's plan will include:

• Holders of administrative claims, priority tax claims and priority claims will be paid in full in cash;

• Debtor-in-possession facility claims will be either paid in full in cash from proceeds of the exit financing or be converted into new common stock;

• Other secured claims will be reinstated;

• Holders of current trade vendor unsecured claims will recover 17½% in cash from exit financing proceeds;

• Holders of non-insider general unsecured claims, Aker and Boeing claims and Yuzhmash and Yuzhnoye claims will receive a share of creditor trust equity interests;

• Holders of Energia claims will receive a share of $28.8 million in preferred shares of reorganized Sea Launch in exchange for allowed partner currency control claims and a share of creditor trust equity interests in exchange for allowed partner claims;

• Holders of Sea Launch equity interests will receive no distribution; and

• Holders of subsidiary interests will retain their interests.

Future plans

"We are thrilled to have successfully emerged from Chapter 11 with a solid financial structure and a healthy manifest of future launches," Karlsen said in the release.

"Completing this transaction will represent a significant accomplishment in the final steps toward re-entering the market as a strong and competitive commercial launch service provider.

"We are now planning for our return to launch operations in 2011, building on the continuity of our collective expertise and proven experience of our launch system and our team."

Energia Overseas spokesman Dennis Shomko said in the release, "We had an opportunity to systematically analyze all the existing processes and operations, both internal and external, and as a result, we are talking about an overhaul of the business at all levels."

Sea Launch said it is gearing up its operations and conducting maintenance of all launch related systems, while at the same time preparing for a Land Launch mission slated for as early as the first quarter of 2011.

Jefferies & Co., Alston & Bird and Chris Picone of Buccino & Associates, Inc., served as advisers to Sea Launch.

Sea Launch, a Long Beach, Calif., heavy-lift satellite commercial launch service provider, filed for bankruptcy on June 22, 2009. Its Chapter 11 case number is 09-12153.

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