Sea Launch files for Chapter 11 protection

[Herb Schaltegger]

Herb, my inside info is that the ships proved incapable of maintaining a  secure at-sea docking that allowed a safe ship-to-ship rocket transfer. They had to load the one vehicle on the platform in harbor and could not reload.

Anyone else hear anything like that?

That seems to jibe with what sammie posted earlier up the thread.  Well, it wouldn't be the first time something that looked great on paper didn't quite pan out.

Of course, ultimately it doesn't much matter since the flight rate has never required it.  As it is, Sea-Launch has typically done no better than around one launch every 60 days or so, but I have to wonder if that's more due to the availability of payloads than to any inherent inability to sortie more quickly.

[sammie]

I guess at the beginning of Sea Launch the zenit wasn´t the most reliable launcher around, with a low launch rate to boost. It´s two stage version having a couple of failures, Globestar being the most famous. So I guess that at the beginning there wasn´t the market to warrant sea transfers.

Later when the market picked up Sea Launch itself had a big failure, and there was the problems with not enough RD-171s that sort of messed up the supply-chain of launchers, at a time where the market could have sustained a higher launch rate.

Ow, and the roughest day in a harbour is smooth sailing at sea, it would have been quite a feat if they did transfer a sat and launcher in the middle of the pacific

[hop]

A bit of sea launch history I came across this in North Korea’s Nuclear and Missile Programs Crisis Group Asia Report N°168, 18 June 2009

Ukraine inherited advanced space and missile programs from the Soviet Union, and officials initially refused to abandon the missile program to join the MTCR.175 In September 1993, Washington’s policy on MTCR membership and space launches was clarified to allow new members to retain their SLV capabilities as long as they abandoned their offensive ballistic missiles.176 The U.S. then began to offer incentives and guaranteed Ukraine a share of the space launch market based on a concrete percentage for its companies. Kiev retained its short-range Scud missiles after joining the MTCR, which the U.S. claimed did not interfere with its MTCR membership.177

My bold. The references make it clear that Sea Launch was part of this incentive. Probably old news for many here, but possibly relevant to it's long term viability.

[nooneofconsequence]

Another part of this story is the global financial climate, cash shortages, and increased launch insurance costs.

Its a difficult time. There are also certain players that can take advantage of a company's mistakes, as happened with SS/L.

[Danny Dot]

snip

Ow, and the roughest day in a harbour is smooth sailing at sea, it would have been quite a feat if they did transfer a sat and launcher in the middle of the pacific

This would have been really fun to have watched.  "All hands on deck.  All hands on deck!!"

Danny Deger

[vt_hokie]

Airlines were operating under Ch.11 protection for a long time after 9/11. This does not necessarily mean the end for Sea Launch.

Indeed.  Loral went through the Chapter 11 process when I worked for them.  They're still in business, obviously, though I believe the company still isn't profitable.  Seems like defense is where the money is - I learned the hard way about investing in commercial space!

[Zachstar]

In my view the whole situation for launchers is getting worse and worse.

There is already a great many communications birds up there. And they are more efficient and will last longer.

The technology to make the birds better and lighter is progressing.

etc...

Not to mention the rapid growth of ground nets. Whole nations are sprouting fiber optic nets that have the ability to deliver massive speed and HD video.

[vt_hokie]

We need to get people to give up their cell phones in favor of Iridium or Globalstar phones, to create some new launch demand!

[yinzer]

I poked around some.

The Sea Launch company is owned by a partnership including Boeing (integration), RSC Energyia (engines and upper stage), Yuzhnoe (lower stages), and Aker ASA (ships).  The company also owes money to the companies in the partnership and to other banks, in amounts that I couldn't find offhand but are probably in the Chapter 11 filing (or Boeing's annual reports).

Chapter 11 usually means that the people who loaned the company money (creditors) agree to reduce or restructure their loans and get ownership of the restructured company in exchange.

So if the old Sea Launch had $1B in debt at a 10% interest rate, they'd have to pay the creditors $100M a year.  Any profits beyond that would go to the owners.  But Sea Launch in only bringing in (say) $50M a year beyond operations, so they can't make the payments.  So the creditors will write down the debt to $400M at 10% and take ownership of the company; this way they'll get $50M a year instead of nothing, and maybe more if the launch market picks back up.  These numbers are all made up, but the general picture still stands.

The option is to sell off all the assets, but what use do they have outside of a space launch business?

It gets a bit interesting because there is overlap between the owners and the creditors.  If someone got their hands on a copy of the bankruptcy filing things would become clearer.

[nooneofconsequence]

Another way life gets difficult for an aeronautics company is where a customer attempts to jerk it around with contract, cash flow, or both.

They thus possess the ability to *damage* its financial operations, by how they exploit the contract as a weapon. This occurred after Loral screwed up with Globalstar, where a customer tried to force an acquisition of part of its operations so as to deny other customers by making an exclusive arrangement. Only recourse was a Chapter 11 filing to address the misuse of the contract. It was avoidable otherwise.

Happens a lot in aerospace.

[Space Lizard]

Ten years without making any profit according to Boeing 8K filings.

My business would not have survived that long with similar results.

[mr.columbus]

Ten years without making any profit according to Boeing 8K filings.

My business would not have survived that long with similar results.

SpaceX is around for 7 years and has made profit on paper only (government grants, customer downpayments etc.). No profit from operations in all these years (and hardly any revenue), and it's likely the next 3 years won't be that much different.

So, you can actually stay afloat easily for 10 years without making much money from the products or services you want to offer. The problem is, once it becomes clear that it will stay this way in the future, you are screwed.

[Nomadd]

 I know that Skyterra was more worried about schedule than price when they jumped ship to Proton. The old MSATs are low on fuel, have questionable solar arrays and failed transponders, and it would be a disaster for one to give out before the new bird is up since the gear won't work with any other satellite. I guess ILS was considered a better bet time wise.
 I always like the Sea Launch story, but with a hundred MSAT units that won't work on anything else, I'm glad they switched.

[McDew]

From the Chapter 11 documents filed with the court.

Sea Launch has $2.02B in debt (excluding claims from pending contract terminations for default) and a couple hundred million in assets. Doing some simple math based upon performing 30 launches to date results in losing approximate $60M per launch so far for the program.  Not a very good business model....

A few classic quotes :
"...cost structure is not in line with revenues they can generate and has resulted in operating losses."

"When the Debtors' (ie. Sea Launch) liquidity worsened, to enable the Debtors' to make required cash payments due and owing to unaffiliated creditors, the Debtors stopped paying the Investors (ie. Partners) for goods and services that the Investors provided to the Debtors in connection with the Debtors' launch services."

The BIG LIE gets exposed….. Sea Launch was blaming supply chain production problems and Federal preemption for lack of hardware with a year or more in launch delays for their customers.  The delays were actually caused by Sea Launch when they stopped making payments to the suppliers for the launch vehicle hardware. 

No surprise that customers started leaving when their payments were not being used to pay/order hardware for the launch services they had purchased.

[mr.columbus]

From the Chapter 11 documents filed with the court.

Sea Launch has $2.02B in debt (excluding claims from pending contract terminations for default) and a couple hundred million in assets. Doing some simple math based upon performing 30 launches to date results in losing approximate $60M per launch so far for the program.  Not a very good business model....

A few classic quotes :
"...cost structure is not in line with revenues they can generate and has resulted in operating losses."

"When the Debtors' (ie. Sea Launch) liquidity worsened, to enable the Debtors' to make required cash payments due and owing to unaffiliated creditors, the Debtors stopped paying the Investors (ie. Partners) for goods and services that the Investors provided to the Debtors in connection with the Debtors' launch services."

The BIG LIE gets exposed….. Sea Launch was blaming supply chain production problems and Federal preemption for lack of hardware with a year or more in launch delays for their customers.  The delays were actually caused by Sea Launch when they stopped making payments to the suppliers for the launch vehicle hardware. 

No surprise that customers started leaving when their payments were not being used to pay/order hardware for the launch services they had purchased.

Given the current economic climate, the outlook for orders of commsats in the next 2-3 years and the fact that Sea Launch even at 3-4 launches made operating losses in the last years, we can safely assume this means a conversion to Chapter 7 will follow and assets will be liquidated. It probably is easier to find buyers for the different parts of the company than for the company itself, and I really don't believe the current senior creditors of Sea Launch are willing to run that company...

[agman25]

If they go into Chapter 7 Orbital could pick up their launch platform for cheap.

[nooneofconsequence]

Don't assume a Chapter 7 exit.  Continuation here is a function of understanding if a break even business can be constituted out of the current parts (e.g. a plan of reorganization).

Look to see if the judge tends to accept this as plausible - that's the early indicator.

The assets are too specialized to be of use to others - they are only valuable to a "going forward" operation of exactly the same kind.

The issues I'd look at are if its important for Ukraine to have SeaLaunch / LandLaunch continue. If it is, it will. I'm betting it will.

And no, Orbital or others won't want the platform - too costly to convert. Everybody presumes this stuff is almost plug-and-play,
nothing could be further from the truth.

[edkyle99]

The option is to sell off all the assets, but what use do they have outside of a space launch business?

It could sell off whatever ownership is has in Land Launch, since Land Launch doesn't involve all of the Sea Launch partners (Boeing doesn't build the Land Launch fairings and the ship ownership isn't involved). 

Perhaps it could sell off its payload processing work?

Or, maybe, this really is the end of the "Sea Launch" side of the business, with Land Launch continuing.  That would end Boeing's participation, paralleling Lockheed's departure from International Launch Services a few years ago.

 - Ed Kyle

[bobthemonkey]

A few years ago the semi-sub platform might have been worth something on the open market, but in the current climate, there are less hacked about (from their original purpose) platforms available, and yards have dropped their prices for new builds. That is assuming anyone would want a new fleet at this time. Equally, the Commander isn't really that marketable an asset

[mr.columbus]

Don't assume a Chapter 7 exit.  Continuation here is a function of understanding if a break even business can be constituted out of the current parts (e.g. a plan of reorganization).
...

The assets are too specialized to be of use to others - they are only valuable to a "going forward" operation of exactly the same kind.

If they were operating on a constant loss on an operating basis (not even factoring in interest payments etc.), this business can't be continued. In any event, they would need either a dedicated investor who puts up a lot of its own money (very unlikely) or creditors willing to lend them money (again) while current senior creditors take over ownership of the company.

The times when these kind of things worked out are over. DIP lending is nearly impossible to get in the current climate (except if you have government backing...). And I just don't see a business plan for Sea Launch that will get them operating profitable. After all, you can't really change much in that company, costs for the launcher are nearly fixed (and increasing), costs for the launch platform are fixed and firing people to slim down overhead gets you nowhere except into the next launch failure.

I will be extremely surprised if Sea Launch (or any successor using the same assets and the same launcher) is going to continue operations.