Subsea cable company acts to restructure debt
Submarine cable company Seabras 1 Bermuda Ltd has filed for bankruptcy protection in the US as it pursues a secured debt-restructuring plan.
Severe price drops on a fibre-optic cable system between the US and Brazil have been cited as the reason why it, together with its subsidiary Seabras 1 USA LLC, filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code.
The petitions were filed on December 22.
The construction of a competing, larger and newer underwater cable project, and the Brazilian economy collapse, led to “severe price drops” on the Seabras-1 cable system between New York and São Paulo, and led to customers shifting to buying small amounts of capacity on the cable for one to two-year leases, paid monthly, rather than the previously expected “front-end payments” of large cash amounts.
Larry Schwartz, chief executive officer of Seabras 1 Bermuda and Seabras 1 USA, described those market landscape changes in a New York court document.
Seabras 1 Bermuda, and a number of its subsidiaries, own the Seabras-1 fibre-optic cable system between New York and São Paulo.
The company has directors registered in Bermuda, and was an exempted company incorporated under Bermuda's laws when it, along with others, entered into a financing agreement in 2015.
But a downturn in business caused Seabras 1 Bermuda to default under the agreement and ultimately file for bankruptcy protection, Mr Schwartz explained in the court document.
Separately, in a letter to customers and vendors on Monday, he said the reason for the Chapter 11 move was to restructure Seabras 1 Bermuda's secured debt.
“The restructuring process is a very positive development for the companies' business and for the companies' loyal customers. It will provide the best opportunity to enable the business to not just survive, but prosper,” he said.
According to a statement, Seabras 1 Bermuda and Seabras 1 USA expect to complete the process relating to the Chapter 11 filings within the next few months, and to emerge within the second quarter of 2020, subject to all required approvals.
Seaborn Networks, the Massachusetts-headquartered operator of the companies' business, is not part of the filings and continues to be the operator of the companies' business.
The statement said: “Seaborn is not owned by the companies, but Seaborn is one of the indirect shareholders of the companies.
“Seaborn's work in this regard is not expected to be impacted by the filings; and the companies expect that Seaborn will continue to provide all SG&A and operations and engineering services for the companies. Seaborn itself has no borrowed money indebtedness and is a healthy business. Through the filings process, Seaborn's management and workforce is expected to remain as it is today.”
The statement said customers and vendors should expect to work with all Seabras' entities, and with Seaborn, as usual throughout the process.
In addition the plan to be proposed is not expected to “contemplate any changes in business arrangements or activities for any of Seabras 1 Bermuda's subsidiaries, or for Seaborn, and all trade and vendor claims are expected to be paid in full”.