PARIS — Aeronautical and maritime satellite service provider Global Eagle Entertainment (GEE) on July 12 announced the first of what could be an expensive series of cash payments to its creditors as a penalty for not filing recent earnings statements.
Los Angeles-based GEE said that as of July 11 it had paid its lenders, led by Citibank, the $1.4 million required by loan covenants that were amended and tightened on June 30.
The new obligations require GEE to pay 0.25% of its revolving credit commitments and term loans per month with each new deadline that passes without the company filing its 2016 annual financial report and subsequent quarterly reports.
The conditions also force GEE to file, every two weeks, an updated accounting of its liquidity balances.
In its July 12 filing with the U.S. Securities and Exchange Commission (SEC), GEE said that as of July 11 it had $69 million in cash, of which $31 million was held by non-U.S. subsidiaries, and $50 million available through its credit facility.
In the absence of earnings statements and the standard quarterly conference calls with investors, it is difficult to determine what is happening inside GEE.
The company’s CEO and CFO abruptly left in February. Dave Davis, the outgoing CEO, was put on a hefty retainer by the company, suggesting that whatever the reason for his departure, it was not considered sufficient to force an immediate break with his former employer.
Davis was deployed to deliver media interviews — http://bit.ly/2sP6NA1 — in which he sought to downplay the importance of the management change and the disclosure of insufficient internal financial controls that cause the delayed financial filings.
Jeffrey A. Leddy, who had been a GEE board member, was named CEO in February and also assumed the role of interim chief financial officer then. Leddy has not gone public with an explanation of GEE’s current status and vision.
The CFO position was filled in April by Paul Rainey, who held the same job at Harris CapRock, an energy and maritime communications services provider that was purchased by Speedcast International earlier this year.
After the management change and the financial reporting delays, GEE told investors that it had found no fraud in its accounting and that its 2016 revenue was likely to be at the low end of the previously announced range of $530 million to $538 million. It also said it did not expect to restate its previous quarterly earnings results.
It also had said it would file its 2016 annual report before June 30. Failing to meet that deadline is what caused its lenders to tighten their terms in exchange for not declaring GEE in default on its debt.
A splashy acquisition, and then…
GEE’s stock is down 45% since the beginning the year as investors reacted to the management changes, the financial-controls issue and the continued lack of financial disclosures for late 2016 and since then that threatened the company’s NASDAQ stock market listing.
Industry officials have said GEE’s mid-2016 purchase, for $550 million, of Emerging Markets Communications, a maritime connectivity specialist that had purchased maritime connectivity provider MTN previously, has not gone as well as planned.
As an in-flight-connectivity provider GEE is, like its competitors, in a rush to line up as many airlines as possible to its service before the large airline groups are spoken for.
This has led to a rough competitive environment in which GEE and its direct competitors, including Panasonic Avionics and Gogo, must commit to large satellite capacity purchases to assure airlines they have sufficient satellite capacity to meet airline passenger broadband demand. Inmarsat and ViaSat, both with their own satellites and established businesses, are also in the hunt for airline commitments.