OneWeb committee looks to file lawsuit tied to project contributions

By Caroline Salls

Pittsburgh, Aug. 5 – OneWeb Global Ltd.’s official committee of unsecured creditors requested court approval to file a lawsuit for recharacterization and equitable subordination against some of the company’s investors and secured creditors, according to a motion filed with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the committee sought approval to move forward with or settle claims against investor defendants SoftBank Group Corp., Airbus Group Proj BV, Qualcomm Technologies, Inc., Banco Azteca, SA, Institucion de Banca Multiple, the Government of the Republic of Rwanda and Global Loan Agency Services Ltd., as well as administrative and collateral agent GLAS Trust Corp. Ltd.

The committee said the investor defendants, which are the controlling shareholders of OneWeb, purchased nearly $1.6 billion in promissory notes from OneWeb during the two years leading up to its bankruptcy filing to help finance its “ambitious plan to revolutionize the world’s internet connectivity” by launching a massive fleet of low-Earth orbit (LEO) satellites capable of high-speed data transmission to customers on the ground.

Although classified as debt, the committee said these investments were actually capital contributions made “to salvage, and, through stock warrants accompanying the purported notes, enhance, hundreds of millions of dollars of pre-existing equity investments in the company.”

“At the time it issued the purported notes, OneWeb was a mere project that aspired to one day become an operating business – it had no customers, was years away from generating revenue and had no means of repaying a legitimate loan,” the motion said.

The creditor group said the bankruptcy court may recharacterize a creditor’s claim as equity if the underlying debt is found to be equity from its inception based on the transaction’s economic reality.

“Here, the facts and circumstances surrounding the purported notes present a textbook case for such recharacterization because it is clear that the investments were at all times effective capital contributions and not loans to the company,” the motion said.

“This is not a situation where real lenders came to the rescue of a once-successful, already existing business that fell on hard times; rather, this is a case of strategic investors who made speculative bets on a high-risk project to support their parochial business interests and to reap the financial rewards of the project’s potential success.”

In addition, the committee said the investor defendants classified the investments as notes to obtain priority over other equityholders and creditors if OneWeb filed a bankruptcy case, “which the investor defendants saw coming from at least the middle of 2018.”

As a result, the committee said the notes must be treated as equity to ensure the defendants do not receive a recovery that is ahead of or even equal to that of general unsecured creditors.

Arlington, Va.-based OneWeb develops a constellation of satellites to enable internet access. The company filed bankruptcy on March 27 under Chapter 11 case number 20-22437.

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