Kite Lake Sends Letter to Inmarsat Plc Board of Directors Following Letters From Oaktree and Rubric
The full text of the letter is set out below.
The Board of Directors of Inmarsat Plc
99 City Road
London, EC1Y 1AX
5 November 2019
To the Board of Directors of Inmarsat Plc:
Kite Lake Capital Management (UK) LLP (“Kite Lake”), as Investment Manager / Sub-Advisor for and on behalf of underlying funds, has an economic interest in 17,770,258 shares of Inmarsat Plc (over 3.8% of the outstanding equity).
Kite Lake notes the letter published by Oaktree Capital Management (“Oaktree”) on 5 November 2019, and we are in full agreement with the points Oaktree raises. This is an almost unprecedented situation, in which a spectrum asset (“Ligado”), appears to have been ascribed limited to zero value in the analysis of the fairness of the Consortium Scheme price. This is evidenced by the lack of any reference in the Scheme document to Ligado’s potential value, and on the 1Q 2019 Inmarsat Earnings Call held 1st May 2019: To quote CEO Rupert Pearce “… there will be no Ligado revenues in 2019 and we’re not planning for them to return to paying us, anytime in the near future.”
It has since been widely reported that Ligado could very well receive final regulatory approval imminently after over 10 years of delays. This approval is potentially only weeks away, and at the very minimum, we believe that the Board should delay the Scheme hearing until just prior to the Long Stop Date of 10 December 2019 to allow as much time as possible to clarify the regulatory position of Ligado to determine the best course of action with respect to Inmarsat’s current shareholders.
The question we pose to the Board is simple: given the material prospect of regulatory approval prior to the Long Stop Date, would the Board recommend a $7.09 offer if it was made today? We believe the answer should be a categorical no.
We also note the letter of today's date from Rubric Capital Management LP ("Rubric"). Like Rubric, in May 2019, Kite Lake voted for the Scheme, having moved shares owned into “cash” from “swap”, at the expense of the funds managed by Kite Lake at the request of Consortium advisors (on the basis that the vote was expected to be very close). We did so after several discussions with one of the Financial Advisors of the Consortium, with the understanding that if there was a material development with respect to Ligado prior to the Scheme Sanction, the Board would have the ability to either change its recommendation of the Scheme or delay the Scheme hearing.
We believe the Board must do the right thing for existing shareholders and delay the Scheme hearing as long as possible in order to clarify the current state of Ligado. We don’t see any disadvantage to existing shareholders in doing so. The shareholders deserve nothing less.
We note the announcement made by Inmarsat today. If the Board declines to engage with the Oaktree request, Kite Lake’s current intention is to attend the Scheme Hearing, and to indicate our concerns relating to the proposed transaction to the Court.