A bankruptcy judge is allowing Speedcast International Ltd. to move forward with a proposed financial restructuring backed by Centerbridge Partners LP but warned of problems that could prevent the satellite communications company from ultimately exiting chapter 11, WSJ Pro Bankruptcy reported. Bankruptcy Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston said on Wednesday that he would grant conditional approval to Speedcast’s disclosure statement, a document outlining the restructuring plan that will be sent to creditors to vote on. The decision allows the Australian company to move forward with a planned transfer of control to Centerbridge, one of its largest lenders, in exchange for a $500 million equity investment. But Speedcast’s largest lender, Black Diamond Capital Management LLC, is challenging the proposed restructuring and argued that creditors shouldn’t vote on it because it violates provisions of the Bankruptcy Code. Judge Isgur said that he was denying Black Diamond’s challenge for the moment since creditors haven’t yet cast their votes, which he said was a necessary step before considering the lender’s challenge to the restructuring plan. However, the judge said he found arguments made against the proposal made by Black Diamond “very persuasive.” Among the issues Black Diamond raised with the plan is that some debt it owns would take a back seat to more junior company claims, violating bankruptcy rules requiring Black Diamond’s debt gets repaid first.
