(Bloomberg) -- Intelsat SA, the bankrupt satellite company, reached an agreement with some of its creditors on a plan that would hand ownership to unsecured bondholders and halve its debt load.

The McLean, Virginia-based company filed a plan to cut its debt to $7 billion. The proposal has the support of creditors holding about $3.8 billion of its obligations, according to a statement, suggesting holders of about 25% of debt have agreed to the plan. The Intelsat Jackson unit’s unsecured bondholders would take control of the new company by converting their holdings to new shares, according to court papers.

Intelsat filed for bankruptcy in May to trim its debt load as it prepared to hand over some of its so-called “C-Band” spectrum to the Federal Communications Commission to be used for 5G wireless service. The company stands to reap nearly $5 billion in payments from the FCC for preparing the spectrum in time for auction.

Under the proposed plan, Intelsat Jackson unsecured debt holders will receive 95% of the company’s new shares, which translates to a recovery of about 8.5%, according to the company’s disclosure statement. ICF holders would get 3.043% of new shares and LuxCo holders would received 1.957%. Unsecured creditors will also be entitled to warrants to purchase additional equity.

Shareholders Wiped

Existing shareholders will be wiped out, and the company’s term loan lenders and first-lien note holders are entitled to cash payments for a nearly 100% recovery. The company will receive a new $750 million secured credit facility.

Intelsat said there was potential for litigation in the restructuring agreement stemming from its convertible note holder’s attempt to lay claim to nearly $5 billion in potential payments from the C-Band spectrum hand over. Those creditors would convert their holdings to their share of the equity, for a recovery of 8.6%.

Holders of 73% of the Connect senior notes, 37.3% of the LuxCo senior notes, 36.1% of the first-lien notes, approximately 34.9% of the term loan, 32.1% of the convertible notes, and 7.6% of the Jackson notes signed onto the support agreement, according to a court filing.

The case is Intelsat S.A., 20-32299, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond). To view the docket on Bloomberg Law, click here.

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