IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION §
In re: § CHAPTER 11
§ SPEEDCAST INTERNATIONAL §
LIMITED, etal., § Case No. 20-32243 (MI)
§
Debtors.1 § (Jointly Administered) §
EMERGENCY MOTION OF DEBTORS
PURSUANT TO SECTIONS 105(a) AND 363(b) OF THE
BANKRUPTCY CODE FOR ENTRY OF ORDER MODIFYING KERP ORDER EMERGENCY RELIEF HAS BEEN REQUESTED. A VIDEO/TELEPHONIC HEARING WILL BE CONDUCTED ON THIS MATTER ON JANUARY 7, 2021 AT 5:00 P.M. (PREVAILING CENTRAL TIME). PARTIES WISHING TO PARTICIPATE TELEPHONICALLY MUST DIAL IN USING THE COURT’S TELECONFERENCE SYSTEM AT 832-917-1510 AND ENTERING CONFERENCE CODE 954554. PARTIES WHO ALSO WISH TO PARTICIPATE BY VIDEOCONFERENCE MAY DO SO BY USE OF AN INTERNET CONNECTION, USING THE WEBSITE GOTOMEET.ME/JUDGEISGUR OR THE FREE GOTOMEETING APPLICATION, SELECTING “JOIN MY MEETING,” AND ENTERING MEETING CODE “JudgeIsgur.”
IF YOU OBJECT TO THE RELIEF REQUESTED OR YOU BELIEVE THAT EMERGENCY CONSIDERATION IS NOT WARRANTED, YOU MUST EITHER APPEAR AT THE HEARING OR FILE A WRITTEN RESPONSE PRIOR TO THE HEARING. OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED
RELIEF IS REQUESTED NOT LATER THAN JANUARY 7, 2021.
SpeedCast International Limited (“Speedcast”) and its debtor affiliates in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the “Debtors”), respectfully represent as follows in support of this motion (this “Motion”):
1 A complete list of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ claims
and noticing agent at http://www.kccllc.net/speedcast. The Debtors’ service address for the purposes of these chapter 11 cases is 4400 S. Sam Houston Parkway East, Houston, Texas 77048.
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Preliminary Statement2
1. The Debtors commenced these chapter 11 cases anticipating an expedited chapter 11 timeline and did not initially seek relief to provide key employees with retention packages during these chapter 11 cases. As negotiations between the Debtors and their key stakeholders regarding a path to emergence extended these chapter 11 cases, the Debtors began losing key employees through voluntary resignations. In response, the Debtors proposed a key employee retention program (“KERP”) on September 24, 2020, which the Court approved on December 2, 2020 (ECF No. 1016) (the “KERP Order”).3
2. The KERP Order authorized the Debtors to pay KERP Awards in two equal installments. The first installment was scheduled to occur upon the earlier of (i) Plan Confirmation and (ii) entry of order approving a 363 Sale (the “First Installment”). The second installment is scheduled to occur, as applicable, (A) following Plan Confirmation, the earlier of (i) one month following the Debtors’ emergence from chapter 11 and (ii) June 30, 2021 or (B) one month following closing of a 363 Sale.
3. The contested confirmation process and additional time provided for Black Diamond Capital Management L.L.C. to consider submitting a plan sponsor proposal—including the time to evaluate any such proposal, potential litigation related to such proposal, and any impacts on the regulatory process—has meaningfully extended the date initially contemplated for payment of the First Installment. These delays have further introduced a high degree of uncertainty among the Debtors’ employees regarding the KERP’s implementation, as well their job security
2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Motion of Debtors for Entry of Order Approving and Authorizing Implementation of Non-Insider Key Employee Retention Plan (ECF No. 752).
3 The Debtors are not seeking relief in connection with the Order Approving and Authorizing Implementation of Key Employee Incentive Plan (ECF No. 1021).
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and the future of the Debtors’ operations. The recent resignation of six key employees, including five KERP Participants, all of whom carried out vital engineering, sales, capacity management, and legal functions within the Debtors’ organization, are emblematic of the need for the relief sought in this Motion. If the payment structure under the KERP is not modified to expedite payment of the first installment of the KERP Award, the Debtors anticipate that additional KERP Participants, in addition to other employees, may also resign. Losing key employees at this stage of the chapter 11 cases will cause the Debtors’ estates irreparable harm.
Background
4. On April 23, 2020 (the “Petition Date”), the Debtors each commenced with this Court a voluntary case under the Bankruptcy Code. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
5. The Debtors’ chapter 11 cases are being jointly administered for procedural purposes only pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and Rule 1015-1 of the Bankruptcy Local Rules for the United States Bankruptcy Court for the Southern District of Texas (the “Local Rules”).
6. The Debtors, combined with their non-debtor affiliates (collectively, the “Company”), are the largest provider of remote and offshore satellite communications and information technology services in the world. Speedcast’s fully-managed service is delivered to more than 2,000 customers in 140 countries via a leading global, access technology, multi-band and multi-orbit network of 80+ satellites and an interconnecting global terrestrial network, bolstered by on-the-ground local support from 40+ countries. Speedcast services customers in
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sectors such as Commercial Maritime, Cruise, Energy, Mining, Government, NGOs, Enterprise, and Media.4
7. On May 6, 2020, the United States Trustee for Region 7 appointed an official committee of unsecured creditors. No trustee or examiner has been appointed in these chapter 11 cases.
Jurisdiction
8. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
Relief Requested
9. By this Motion, pursuant to sections 105(a) and 363(b)(1) of the Bankruptcy Code and Bankruptcy Rule 6004, the Debtors seek entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), modifying the KERP Order to allow the Debtors to pay KERP Participants the first installment of the KERP Awards upon the earlier of (i) Plan Confirmation, (ii) entry of an order approving a 363 Sale, and (iii) January 15, 2021.
10. In support of this Motion, the Debtors submit the Sealed Declaration of Michael Healy, sworn to on the date hereof (the “Healy Declaration”), which has been filed (under seal) with the Court contemporaneously herewith and is incorporated by reference herein.
Basis for Relief
11. The Debtors ability to pay the first installment of the KERP Awards as early as January 15, 2021 is crucial for the Debtors to retain employees critical for uninterrupted business operations and preserving the value of the enterprise. The limited relief is thus in the best
4 None of the Speedcast entities associated with the Company’s Government business are Debtors in these
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interest of the Debtors’ estates and a sound exercise of the Debtors’ business judgment under section 363(b)(1) of the Bankruptcy Code, which empowers the Court to allow the debtor to “use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b)(1). See, e.g., Institutional Creditors of Cont’l Air Lines, Inc. v. Cont’l Air Lines, Inc. (In re Cont’l Air Lines, Inc.), 780 F.2d 1223, 1226 (5th Cir. 1986) (“For the debtor-in-possession or trustee to satisfy its fiduciary duty to the debtor, creditors and equity holders, there must be some articulated business justification for using, selling, or leasing the property outside the ordinary course of business.”); see also In re Gulf Coast Oil Corp., 404 B.R. 407, 414–415 (Bankr. S.D. Tex. 2009) (noting that a debtor’s use of property under section 363(b) is subject to the “business judgment test”).
12. The proposed relief is also a sound exercise of the Court’s equitable powers under section 105(a) of the Bankruptcy Code, which empowers courts to authorize payments that are essential for operating the debtors’ business in chapter 11 and maximizing the value of the estate. See, e.g., In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002) (holding that sections 105 and 1107 of the Bankruptcy Code provide authority for a debtor-in-possession to make payments critical to preserve the estate’s going-concern value).
13. The KERP was structured to encourage the Debtors’ key employees to remain with the Company through the date of Plan Confirmation and the Debtors’ emergence from these chapter 11 cases. When the KERP Order was entered, the Debtors expected confirmation of a plan of reorganization by the end of 2020. As explained above, the confirmation process has extended beyond the originally anticipated timeline, and this delay has understandably generated uncertainty among the Debtors’ employees regarding the KERP’s implementation.
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14. The Debtors payment of the first installment of the KERP Award on January 15, 2021 is consistent with the expectations of the Debtors and the Debtors’ employees when the KERP Order was entered. Further, with the second installment of the KERP Award not being paid until the earlier of (i) one month following the Debtors’ emergence from chapter 11 and (ii) June 30, 2021 or (B) one month following closing of a 363 Sale, the KERP will continue to be sufficiently retentive and encourage the Debtors’ workforce to stay and help ensure a smooth and successful exit from these chapter 11 proceedings.
15. Accordingly, the Debtors submit that the Court should modify the KERP Order as outlined herein.
Compliance with Bankruptcy Rule 6004(a) and Waiver of Bankruptcy Rule 6004(h) 16. To implement the foregoing successfully, the Debtors request that the Court find that notice of the Motion satisfies Bankruptcy Rule 6004(a) and that the Court waive the 14-day period under Bankruptcy Rule 6004(h).
Notice
17. Notice of this Motion will be served on any party entitled to notice pursuant to Bankruptcy Rule 2002 and any other party entitled to notice pursuant to Local Rule 9103-1(d). WHEREFORE, the Debtors respectfully request entry of the Proposed Order granting the relief requested herein and such other and further relief as the Court may deem just and appropriate.
7 Dated: January 6, 2021
Houston, Texas
Respectfully submitted, /s/ Alfredo R. Pérez
WEIL, GOTSHAL & MANGES LLP Alfredo R. Pérez (15776275)
Brenda L. Funk (24012664)
Stephanie N. Morrison (admitted pro hac vice) 700 Louisiana Street, Suite 1700
Houston, Texas 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511 Email: Alfredo.Perez@weil.com Brenda.Funk@weil.com Stephanie.Morrison@weil.com -and-
WEIL, GOTSHAL & MANGES LLP Gary T. Holtzer (admitted pro hac vice) Robert Lemons (admitted pro hac vice) David N. Griffiths (admitted pro hac vice) 767 Fifth Avenue
New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Email: Gary.Holtzer@weil.com Robert.Lemons@weil.com David.Griffiths@weil.com -and-
WEIL, GOTSHAL & MANGES LLP Paul R. Genender (00790758)
Amanda Pennington Prugh (24083646) Jake R. Rutherford (24102439)
200 Crescent Court, Suite 300 Dallas, Texas 75201 Telephone: (214) 746-7877 Facsimile: (214) 746-7777 Email: Paul.Genender@weil.com Amanda.PenningtonPrugh@weil.com Jake.Rutherford@weil.com
Attorneys for Debtors and Debtors in Possession
Certificate of Service
I hereby certify that, on January 6, 2021, a true and correct copy of the foregoing document was served as provided by the Electronic Case Filing System for the United States Bankruptcy Court for the Southern District of Texas.
/s/ Alfredo R. Pérez Alfredo R. Pérez
IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION §
In re: § CHAPTER 11
§ SPEEDCAST INTERNATIONAL §
LIMITED, etal., § Case No. 20-32243 (MI)
§
Debtors.1 § (Jointly Administered) §
§ Re: Docket No. ___ ORDER PURSUANT TO SECTIONS 105(a)
AND 363(b) OF THE BANKRUPTCY CODE MODIFYING KERP ORDER
Upon the motion, dated January 6, 2021 (the “Motion”)2 of SpeedCast International Limitedand its affiliated debtors in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the “Debtors”), for an order pursuant to sections 105(a) and 363(b) of the Bankruptcy Code and Bankruptcy Rule 6004 modifying the KERP Order, as more fully set forth in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 1334; and consideration of the Motion and the requested relief being a core proceeding pursuant to 28 U.S.C. § 157(b); and it appearing that venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Motion having been provided, and it appearing that no other or further notice need be provided; and the Court having reviewed the Motion; and the Court having held a hearing on the Motion; and upon the Healy Declaration; and upon the record herein and upon all of the proceedings had before the Court; and all objections, if any, to the Motion having been withdrawn,
1 A complete list of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ claims
and noticing agent at http://www.kccllc.net/speedcast. The Debtors’ service address for the purposes of these chapter 11 cases is 4400 S. Sam Houston Parkway East, Houston, Texas 77048.
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resolved, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtors and their respective estates and creditors; and after due deliberation and sufficient cause appearing therefor,
IT IS HEREBY ORDERED THAT:
1. The KERP Order is hereby amended to allow the Debtors to pay the first installment of the KERP Awards upon the earlier of (i) Plan Confirmation, (ii) entry of an order approving a 363 Sale, and (iii) January 15, 2021.
2. Notice of the Motion is adequate under Bankruptcy Rule 6004(a).
3. Notwithstanding the provisions of Bankruptcy Rule 6004(h), this Order shall be immediately effective and enforceable upon its entry.
4. The Debtors are authorized to take all steps necessary or appropriate to carry out the relief granted in this Order.
5. This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.
Dated: , 2021
Houston, Texas
