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Law360 (July 22, 2020, 9:47 AM EDT) -- Pointing to the COVID-19 pandemic's flattening of the world's travel industry, California-based Global Eagle Entertainment Inc. sought Chapter 11 protection in Delaware early Wednesday for its on-the-road diversions business, lugging $856 million in secured debt and with a $675 million stalking horse bid for its assets in hand.
Global Eagle announced it has secured the bid from an investor group holding 90% of its first-lien term loans and that its plan would slash $475 million from its debts.
"We expect to emerge from this process with a stronger balance sheet, significantly reduced debt and substantial liquidity, well-positioned to continue supporting our global customers into the future," CEO Joshua Marks said in an announcement Wednesday.
The company and its 16 affiliates provide direct entertainment services to the airline, cruise and travel industries as well as internet services across the same sectors with about 1,100 employees worldwide. Its initial Chapter 11 petition reported $630.5 million in assets against $1.086 billion in liabilities.
Company Chief Financial Officer Christian M. Mezger reported that Global Eagle had been on track for a profitable 2019, with 1.5% growth and an $88 million hike in free cash flow before the coronavirus calamity.
"However, the recent decline in demand for its customers' services as a result of COVID-19, and the uncertainty regarding a potential resurgence of the pandemic, has had swift and negative impact on the company's operations and cash flows," Mezger said.
He said this left the company under "considerable strain" in regards to its liquidity and debt obligations, leading it to begin discussions with its lenders in March.
The resulting restructuring support agreement with participating first-lien lenders calls for a "right-sizing" of the company's capital structure, and would provide the business with $125 million under a "new money" credit agreement. The supporting first-lien lenders also agreed to provide an $80 million debtor-in-possession bankruptcy financing loan.
Initial plans call for an auction around Oct. 10, with sale approval five days later.
The stalking horse bid group is led by lenders managed by Apollo Global Management,, Eaton Vance Management, Arbour Lane Capital Management, Sound Point Capital Management, Mudrick Capital Management and BlackRock Financial Management, the company said in its announcement.
"We believe Global Eagle's services will continue to be core to the passenger experience over the long term, and see significant opportunities ahead for the company to continue driving growth and innovation," Apollo managing director Jeffrey Rosen said in the announcement.
The company's main, first-lien debt is administered by Citibank NA and includes a senior secured term loan with a $503 million balance, maturing in January 2023 and an $81 million balance in a senior secured revolving credit agreement that matures in January 2022.
Those in its capital structure with more than 5% voting power include Nantahala Capital Management LLC, ABRY Partners LLC, Searchlight II TBO-W LP and Frontier Capital Management Co. LLC.
Pulled along with the case is a sizable list of unsecured creditors, led by an $82.5 million unsecured debt administered by U.S. Bank NA and $26.6 million in unsecured debt held by Luxembourg-based New Skies Satellites BV.
Global Eagle said it had retained Greenhill & Co. Inc. as its financial adviser and Alvarez & Marsal is serving as its restructuring adviser.
Global Eagle is represented by Michael R. Nestor, Kara Hammond and Betsy L. Hammond of Young Conaway Stargatt & Taylor LLP and Ted A. Dillman, Helena G. Tseregounis and Nicholas J. Messana of Latham & Watkins LLP.
The case is In re Global Eagle Entertainment Inc., case number 1:20-bk-11835, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Katherine Rautenberg.
Update: This story has been updated with additional information provided by Global Eagle.
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