In-Flight Wi-Fi Provider Global Eagle Files for Bankruptcy

(Bloomberg) -- Global Eagle Entertainment Inc., the provider of in-flight WiFi and related services, filed for bankruptcy with plans to sell itself to its lenders including Apollo Global Management Inc.

The Chapter 11 filing in Delaware allows Los Angeles-based Global Eagle to continue operating while it seeks court approval for a plan to repay creditors. This includes selling itself to an investor group with Apollo, Eaton Vance Management and certain funds and accounts managed by BlackRock Financial Management, according to a company statement.

The deal is worth $675 million, Global Eagle said, and will cut its total debt by about $475 million. The company listed assets of $630.5 million and liabilities of $1.09 billion in its petition, including $855.6 million in funded debt. It employs about 1,100 workers.

Global Eagle’s shares fell as much as 39% Wednesday; they were quoted at $2.46 at 10:53 a.m., down 91 cents. Existing shareholders usually get no recovery when a company goes through bankruptcy. Its unsecured notes were quoted at about 7.5 cents on the dollar.

The company sells internet, media content and data analytics to airlines and cruise lines, among others, which have been devastated by Covid-19. Aviation, one of Global Eagle’s largest customer segments, isn’t expected to see a substantial recovery in passenger traffic until 2023, according to S&P Global Ratings, while major cruise lines have suspended operations through mid-September.

“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 a swift and negative impact on the company’s operations and cash flow,” according to court papers.

The pandemic compounded existing pressure from the heavy debt load at Global Eagle, which lost about $153 million in 2019 and posted negative cash flow for the past two years, the company said.

Bankruptcy Loan

The investor group is giving Global Eagle an $80 million bankruptcy loan, according to the statement. The group also includes Arbour Lane Capital Management LP, Sound Point Capital Management and Mudrick Capital Management.

The $675 million offer will be structured as a so-called stalking horse bid, setting a floor for a potential auction. Any sale or financing needs bankruptcy court approval. Global Eagle also lined up $125 million of financing from certain first-lien lenders that it will get when it exits bankruptcy. The package would include assumption or refinancing of the bankruptcy loan.

The case is Global Eagle Entertainment Inc., 20-11835, U.S. Bankruptcy Court for the District of Delaware.

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