Sea Launch’s bankruptcy filing this week was brought on by recurring financial losses, partially stemming from a 2007 rocket failure that helped set off a cascading series of delays and customer defections, according to court records.
The launch services provider and five affiliated businesses filed for Chapter 11 Bankruptcy protection Monday in a Delaware court.
In the filing, the company said it is unable to repay debt or secure new financing, making bankruptcy reorganization the “best avenue” to keep the company afloat.
Officials say they intend to continue normal business operations, including the pursuit of new launch contracts to bring in new revenue. Whether satellite operators will sign with a company in bankruptcy remains to be seen, but Sea Launch leaders attempted to ease their concerns.
“We want to assure our customers, employees, suppliers and partners that Sea Launch intends to continue to operate after the filing,” said Kjell Karlsen, president and general manager of Sea Launch. “Chapter 11 reorganization provides an opportunity for us to continue operations and focus on building our future plans. We are grateful for the continued support of our customers and partners while we focus on reorganizing for the future.”
Two more launches had been planned for this year. Sea Launch has contracts for 10 launches through 2012, officials said.
Sea Launch reported assets between $100 million and $500 million and estimated debt of almost $2 billion.
The company will explore the potential sale of one or more of its business units during the bankruptcy proceedings, officials said.
The company has long been on shaky financial ground and has “struggled to recognize the success envisioned” when it was formed in 1995, according to the filing.
Officials blamed the weak commercial launch industry, skyrocketing hardware costs, the credit crunch, and intense competition from other launch providers for being unable to “stabilize their business or meet their financial targets,” according to a declaration by Brett Carman, Sea Launch’s vice president and chief financial officer.
Carman cited Sea Launch’s government-backed competitors in Europe and Russia, which snatched commercial satellites left stranded on the ground following a dramatic launch failure in January 2007.
That accident destroyed the Zenit 3SL rocket and a Dutch telecommunications satellite before they even left the launch pad.
The massive explosion also damaged the company’s Odyssey launch platform and grounded the Zenit rocket for nearly one year.
Sea Launch has completed nine launches since returning to flight in January 2008, including six missions staged from sea and three flights under the company’s Land Launch subsidiary.
But the delays caused several customers to move their launches to Arianespace and International Launch Services, Sea Launch’s primary competitors, to ensure their satellites could be sent into orbit on time.
Arianespace offers dual-payload launches on its Ariane 5 rocket, while ILS uses the venerable Russian Proton booster launched from the Baikonur Cosmodrome in Kazakhstan.
“The impact from the failure was largely focused on lost schedule time,” said Paula Korn, a Sea Launch spokesperson. “While we were able to reschedule some of our customers’ missions, a few missions were reassigned or moved off the Sea Launch system to other launch providers.”
One customer, Hughes Network Systems, moved their satellite to an Ariane 5 rocket a month after the mishap. Hughes also filed a claim for a $44.4 million reimbursement for advance payments the satellite operator had already paid Sea Launch.
After Sea Launch contested the claim, an arbitration decision earlier this year ruled in favor of Hughes, saying the launch provider had to pay the advance payments plus interest, an amount totaling $52.3 million.
A standstill agreement brokered in March between Sea Launch and Hughes later expired, and Hughes filed another petition earlier this month to recoup the money. The parties could not reach a payment agreement by the June 22 deadline, the same day Sea Launch filed its Chapter 11 petition.
In a written response to questions, Korn said delays in the delivery of crucial rocket equipment caused further delays, exacerbating Sea Launch’s financial problems. The missed delivery milestones were blamed partly on the world’s financial crisis.
The late deliveries also made it more difficult for Sea Launch to meet its customers’ schedule requirements, causing more payloads to jump to other rockets.
Sea Launch has lost three more payloads so far this year to the Proton rocket, according to an ILS statement last week.
Carman’s declaration also detailed debts owed Sea Launch’s investors and creditors, including $119 million in cost overruns still unpaid from the company’s early development work in the late 1990s.
Sea Launch, based in Long Beach, Calif., is owned by corporate shareholders in the United States, Russia, Norway and Ukraine.
Boeing Co. holds a 40 percent stake in the partnership, providing support services and hardware for the Zenit rocket’s payload unit. Sea Launch owes Boeing nearly $1 billion in loans, trade debt and partner liabilities, according to the bankruptcy filing.
Russia-based Energia, which holds a 25 percent interest, builds the rocket’s Block DM-SL upper stage and supports launch vehicle integration and mission operations.
Aker, a Norwegian shipbuilder, constructed the company’s command ship and launch platform and owns 20 percent of the company.
Ukrainian rocket manufacturers Yuzhnye and Yuzhnoye control a 15 percent share of Sea Launch.
Sea Launch owes more than $1.5 billion to its investors, according to figures provided in court documents. The rest of its debt is in bank loans.
The company stopped paying its suppliers as its financial health slipped, according to Monday’s filing.
“Boeing and the other Sea Launch partners support Sea Launch’s effort to explore restructuring alternatives through an orderly bankruptcy court process,” Boeing said in a written statement.
Sea Launch and its Land Launch divison have carried out 33 missions since 1999. Thirty of those launches were deemed total successes.
“We are hoping to get back on our feet and move forward, doing what we do best, putting our customers’ satellites in orbit,” Korn said.