14 May 20. Raytheon Technologies Board of Directors to Take Voluntary Compensation Reduction. Raytheon Technologies’ (NYSE: RTX) Board of Directors has reduced non-employee director compensation by an amount equal to 20 percent of the director cash retainer. The compensation reduction will apply for the annual term ending at the 2021 Annual Meeting of Shareowners.
The Board’s action follows a decision by CEO Greg Hayes to institute a temporary 10 percent base pay reduction for all salaried employees across its Pratt & Whitney and Collins Aerospace Systems businesses as well as the company’s corporate offices. The temporary pay reductions announced last month by the company go into effect June 1st and extend through year-end. Company CEO Greg Hayes and Executive Chairman Tom Kennedy had previously volunteered to reduce their salaries by 20 percent for the same period.
Raytheon Technologies continues to monitor the crisis and is responding as needed to ensure the wellbeing of its employees, customers and suppliers, while protecting the long-term financial strength of the business.
14 May 20. Intelsat declares bankruptcy. Satellite communications provider Intelsat declared bankruptcy May 13, although its subsidiary which provides services to the Department of Defense is not part of the Chapter 11 proceedings.
CEO Stephen Spengler spun the action as a positive move, claiming it gave the company more financial flexibility for the Federal Communication Commission’s clearing of C-Band spectrum to make way for 5G uses. Major satellite communications companies, including Intelsat, saw their stocks take a massive hit last fall when FCC Chairman Ajit Pai announced plans for a public auctioning of C-Band spectrum, which C-Band holders like Intelsat had hoped to sell off directly.
The company says it will need to spend more than $1bn to meet the FCC’s deadlines for clearing out C-Band spectrum, which it needs to do in order to be eligible for $4.87 bn in accelerated relocation payments. Wiping the company’s significant legacy debt off the books will help it accomplish those actions, said Spengler.
“We intend to move forward with the accelerated clearing of C-band spectrum in the United States and to achieve a comprehensive solution that would result in a stronger balance sheet,” said Spengler in a statement. “This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails.”
Subject to court approval, the company said in a statement it had already secured $1bn in new financing in debtor-in-position funds, giving it the liquidity to continue current operations and finance C-Band clearing costs spurred by the Federal Communications Commission. The company claims that day-to-day operations will not be impacted by the restructuring process—it will continue to launch new satellites and invest in its network with no changes planned.
The Chapter 11 petitions for Intelsat and some of its subsidiaries were filed with the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.
However, Intelsat General, which provides satellite communications to the U.S. military and allied military customers, is not part of the bankruptcy proceedings.
“The immediate concern (for DoD) is continuity of operations and it sounds like that is not going to be a big issue,” said Todd Harrison, director of the Aerospace Security Project at CSIS. “The longer term concern for DoD is how does Intelsat eventually emerge from bankruptcy, and is there any kind of transfer in ownership or an increase in ownership stake that would be concerning from a national security perspective.”
Specifically, investment from Chinese companies could raise alarms for the military and the Committee on Foreign Investment in the United States.
“I think that’s something that DoD will be watching, that Treasury will be watching,” he said. “It will be a positive side from DoD’s perspective if wherever the capital is coming from is from a U.S. source.”
When asked about potential Chinese investment in a bankrupt Intelsat May 14, U.S. Air Force Assistant Secretary for Acquisition, Technology and Logistics Will Roper acknowledged he had concerns.
“It’s a topic that’s harder for me to talk about, but we are mindful of adversarial tactics in this period. Every crisis is an opportunity, and with companies coming under duress it is an opportunity for predatorial tactics targeting IP that countries would not have access to otherwise,” he told reporters.
Furthermore, Roper noted that the decision to financially support a company like Intelsat to prevent foreign investment requires a different calculus than a traditional stimulus.
“The way to engage if we risk losing IP to a nation for whom it’s not in our interest to have it, it’s a very different strategy (than whether we) should engage to prop up a company through stimulus,” he said. “When the former appears to happen, then we need to pivot into a different gear than we would be in the latter. We simply cannot do stimulus for every company that is in duress right now.”
Intelsat isn’t the only major satellite company to declare bankruptcy. OneWeb—who have been building a proliferated low earth orbit constellation to provide broadband—declared bankruptcy in March. DoD had been exploring utilizing OneWeb for communications in the Arctic among other things, and Lt. Gen. David Thompson, vice commander of Headquarters Space Force, noted earlier this week that the department’s new Space Acquisition Council was looking into helping OneWeb and other financially vulnerable space companies impacted by COVID-19.
Intelsat noted in a statement that several of its end markets had been impacted by COVID-19.
Roper said he was concerned with how COVID-19 was disproportionately affecting space and aviation companies, which rely more heavily on commercial revenue than other parts of the defense industrial base.
“That’s why we’ve taken such aggressive means to accelerate contract awards,” said Roper. “We’re worried about space, as well, especially microelectronics. All of the Space Acquisition Council shares that concern. And as we see the Chapter 11s being filed—we’re tracking them—but our concern as an acquisition enterprise has got to be industrial base health and not picking winners or losers with specific companies. It’s ensuring that we are engaging to have a healthy industrial base on the other side.”
Roper added that he had approved the acceleration of a major satellite award that should be announced this week as part of the department’s efforts to increase the flow of funding to defense companies during COVID-19. (Source: Defense News)
14 May 20. Lurssen and German Naval Yards to Merge, TKMS Left Out. German shipbuilders Lürssen and German Naval Yards want to merge their military divisions, and have agreed in principle to combine the businesses in a joint venture, the companies announced on Wednesday. The two groups would thus replace Thyssen-Krupp Marine Systems (TKMS) as the leading German naval shipyard, the German daily Handelsblatt reported May 13. Commercial shipbuilding activities are excluded from the planned merger. In the coming weeks, the two companies will work out the details of the joint venture, and according to some sources the management will be at Lürssen. Consolidation of German naval shipyards is long overdue, according to many experts, as compared to other countries too many suppliers are fighting for the few orders that are awarded each year. Alone, Lürssen, German Naval Yards and TKMS are too small to survive against other European heavyweights like France’s Naval Group.
“We are convinced that consolidating our shipyards in naval shipbuilding makes sense and is beneficial in order to strengthen their competitiveness in the long term,” explained Friedrich Lürssen, a partner of the Lürssen group. Iskandar Safa, owner of the German Naval Yards umbrella company Privinvest, emphasized that the reorganization of the shipyards was overdue. “Our customers need partners who are large and capable of fulfilling large, strategically important orders.”
The federal government is currently planning investments of over 10bn euros to strengthen the naval forces, and the biggest share will go to the new MKS 180 multi-purpose frigate. The federal government recently awarded the order to the Dutch Damen Group because the German shipyards could not meet the requirements of the Ministry of Defense. German Naval Yards, which was unsuccessful when the contract was awarded, has taken legal action against the Dutch bid.
The former industry leader is left out
It is now foreseeable that Iskandar Safa’s company will withdraw its complaint, Handelsblatt reported, as the Kiel-based company could now become involved in the deal through a back door. The four to six MKS 180 ships are to be manufactured in the Lürssen shipyard, which will generate the lion’s share of the billion-euro deal.
Thyssen-Krupp Marine Systems, the former industry leader, falls by the wayside. Lürssen and Safa had originally negotiated a three-way merger with representatives of the Essen parent company. However, the three could not reach a final agreement.
There are two main obstacles to a three-way merger with TKMS, Handelsblatt reported: First of all, TKMS is primarily active in the underwater area, and neither Lürssen nor German Naval Yards are interested in this business because of the enormous financial risk involved in building submarines.
In addition, Thyssen-Krupp is listed on the stock exchange while both Lürssen and German Naval Yards are family-owned companies. “They run their business differently and therefore speak a common language,” said a manager familiar with the processes. The talks with Thyssen-Krupp made this difficult.
TKMS’ exclusion, however, is not final. At some future date, the surface warship business of TKMS could be integrated into the new joint venture, the two companies said, but it is necessary to first complete the initial merger of the two shipyards. Competition authorities still have to approve the project, the two companies noted. (Source: defense-aerospace.com)
11 May 20. Aero Precision and Kellstrom Defense Acquisition Update. As previously announced, Aero Precision acquired Kellstrom Defense on March 2, 2020. The harmonization of the combined business is on track to the overall integration timeline. Since the acquisition, the combined company has been working diligently on synergizing locations and operations to streamline its effectiveness, positioning itself to provide more robust sustainment solutions to customers around the globe.
Currently, the combined aftermarket leader has over 45 strategic OEM agreements providing tip-to-tail support, in-house repair capabilities on over 7 aircraft systems on multiple platforms including; F-16, C-130, F-15, P-3 and more along with manufacturing capabilities on thousands of structural parts and growing. At the forefront, is building on the foundation of the businesses and strengthening capabilities between its four main business segments; strategic distribution, engineered products, repair services and logistics solutions between 7 operating locations within the United States. The combined company’s value proposition is stronger than ever, providing customers and partners with well-rounded solutions to support sustainment and readiness for the global military aftermarket industry. Solutions include manufacturing, forecasting and planning, robust inventory for JIT delivery, licensing capabilities, obsolescence solutions, in-house engineering, and in-house repair capabilities. The identity of the company is under evaluation and we look forward to an announcement of the new brand in September of 2020.
The board of directors appointed Brad Morton as their newest member. Brad comes to us with years of experience from Honeywell and Eaton Aerospace. His knowledge of the industry and the aftermarket business will help guide the company on its new path forward.
“Our dedicated integration team has been working extraordinarily hard on the integration to ensure our customers and partners get the best solutions in the interim and into the future. We are extremely excited for the future of the company and look forward to providing insight and updates as we work to finalize the integration” said Tony Grant, Vice President of Business Integration at Aero Precision/Kellstrom Defense.
04 May 20. Amazon Activity Around OneWeb. Jeff Bezos’s Amazon is studying UK-headquartered satellite business OneWeb which is in Chapter 11 bankruptcy protection in the US, as is being reported by journalists Chris Forrester at the Advanced Television infosite.
The Sunday Telegraph reported that Bezos, who has his own Project Kuiper mega-constellation of satellites in the planning and development stage, had his lawyers inspecting OneWeb’s assets. Other due-diligence examinations of OneWeb’s financials include Elon Musk’s SpaceX and Paris-based satellite operator Eutelsat.
The UK government has also examined OneWeb’s books and assets and this is understood to be connected to a request from OneWeb for a cash injection to help keep it afloat.
The deadline for interested parties to express an interest in making a formal bid will expire at 5:00 p.m., New York-time, on May 4th. The actual auction process will take place on July 2nd if more than one interested party expresses interest.
The formal press advertising confirming the bankruptcy of OneWeb appeared in various newspapers on May 1st.
The logic for Bezos in entering a bid for all or part of the OneWeb business is that it would give Amazon a ‘fast track’ to launching Project Kuiper, although some aspects of the Kuiper plan would need adjustment.
However, Bezos has his own rockets in development which would easily launch the remaining satellites in the OneWeb plan. Moreover, unlike SpaceX and Eutelsat, Amazon has millions of registered users around the globe who might become subscribers of an Amazon-backed, broadband-by-satellite system.
The logic for Eutelsat is that they are the only ‘Big Four’ satellite operator without an LEO satellite plan.
Intelsat had an agreement with OneWeb, which might be re-instated with a successful bidder for OneWeb’s assets. SES has its existing O3b MEO system and expansion with mPower satellites. Telesat has a scheme for almost 300 LEO satellites.
Up for grabs are OneWeb’s spectrum and frequency allocations, as well as 74 satellites already on-orbit. (Source: Satnews)