Who Owns a Satellite After Its Operator Goes Bankrupt? Lenders, Licences and Iridium’s $25 Million Sale

In November 1984 astronaut Dale Gardner held up a “For Sale” sign during a spacewalk from the shuttle Discovery. NASA calls it a “light reference” to the satellite the crew had just recaptured. It was also legally accurate. Lloyd’s records that Westar 6 and Palapa B-2 had been “acquired by underwriters” after the claims were paid, and the plan was to refurbish and resell them.

That was a failed insurance risk, not a bankruptcy, but it shows the question people ask now about insolvent operators. Who owns a satellite after its operator goes bankrupt? The short answer has three parts, and they do not all point the same way. The hardware goes into the estate. The licence belongs to nobody who can sell it. And whoever ends up in control needs a regulator’s permission to switch it on.

I use US law here because Iridium, TerreStar and OneWeb all ran through US courts, and I flag where other systems differ. This is a general explanation, not advice on a particular case.

The hardware goes into the estate

Filing Chapter 11 creates an estate holding “all legal or equitable interests of the debtor in property”. A satellite the debtor owns falls within that, and being 36,000 km up makes no difference. Article VIII of the Outer Space Treaty says ownership of objects launched into space, and of their parts, is not affected by their presence there. We cover that clause in our Outer Space Treaty guide.

The debtor can then sell it outside the ordinary course after notice and a hearing, and under section 363 may sell free of liens if a listed condition is met. Capacity contracts are a separate risk. Under section 365 the debtor may assume or reject executory contracts with court approval, so a customer with a transponder deal should read its contract before assuming it survives.

If the operator leased the satellite, or a lender took title, the analysis changes. Ownership follows the documents, so the first job in any distress is to read the financing agreements.

The licence is not property you can pledge

Here the law parts company with the hardware. 47 USC 301 keeps radio channels under federal control and allows their use, but not their ownership, under time-limited licences. Section 310(d) bars any transfer of a station licence, “voluntarily or involuntarily”, without FCC approval.

The FCC treats a security interest in the licence itself as contrary to its policy. But in 1994 it said a lien on the proceeds of a licence sale is acceptable. That gap produces the classic dispute, described in a New York Law Journal column by Alan Christenfeld and Barbara Goodstein. If the licence is sold after filing, are the proceeds new property, which a pre-bankruptcy lien cannot reach under section 552(a)?

TerreStar Networks, a mobile satellite operator, tested this. It had issued $500 million of notes secured on, among other things, its rights in the proceeds of any FCC licence sale. After it filed in October 2010, Sprint Nextel attacked the lien, and in August 2011 the New York bankruptcy court upheld it. The Tenth Circuit reached the same result in In re Tracy Broadcasting, 696 F.3d 1051 (2012), a radio case. That is a good outcome for lenders, but I would not treat it as automatic. A security agreement should reach the proceeds and the economic value of the licence in express words, as TerreStar’s did.

Spectrum and orbital slots add a further layer. An article in the Singapore Journal of Legal Studies points out that, as a matter of international law, there is no property in spectrum or an orbital slot, while calling licences perhaps the most important intangible asset of a satellite system. We explain the filing system in our ITU piece.

Why lenders cannot just repossess it

A bank can seize a lorry. It cannot seize a satellite. The same journal article says physical repossession is impracticable, so the realistic remedy is constructive repossession through taking over the command codes or the control station. In practice, a lender needs a co-operative operator or a co-operative court.

Nor is there a special rule. Section 1110 of the Bankruptcy Code gives financiers of aircraft and vessels a route to recover equipment from a debtor. Its text does not mention satellites or spacecraft. UCC 9-301 helps with part of the problem, because perfection generally follows the law of the debtor’s location. For goods, though, it ties the priority of a non-possessory interest to where the goods are, and a satellite is in no jurisdiction at all. I have not seen a court resolve that.

The FCC decides who operates

The rule at 47 CFR 25.119 requires approval for voluntary and involuntary assignments alike, and it names bankruptcy as an example. An involuntary transfer of control must be filed within 10 days of the event.

OneWeb shows the sequence. It filed on 27 March 2020 with 74 satellites in orbit. According to an FCC public notice, the FCC first approved assignment of its licences to OneWeb as debtor-in-possession. After a court-supervised sale, a company called BidCo won the right to buy the equity for about $1 billion, and it needed FCC consent for that too, which followed weeks later. The bankruptcy court confirmed the plan on 2 October 2020, with the UK government and Bharti Global as the backers.

Bankruptcy does give operators one shield. Section 525(a) stops a governmental unit from revoking or refusing to renew a licence solely because the holder is a debtor. It does not excuse the holder from meeting the conditions of the licence.

Iridium and the deorbit that never happened

Iridium is the case everyone cites, and it shows how little the hardware may fetch. Iridium filed in August 1999. ABC News reported in December 2000 that Motorola had prepared a 14-month controlled deorbit of the 66-satellite network because no qualified buyer had emerged. On 22 November 2000 the court gave conditional approval for Iridium Satellite LLC, a group led by Dan Colussy, to buy the operating assets for $25 million. A projected two-year, $72 million Pentagon contract was a precondition. ABC valued the satellites at about $5 billion.

The lesson I take is that a constellation’s value lies in someone being willing to operate it. A government customer can matter more than any lien.

Who pays to bring it down?

This is the question that worries me most, and I have found no decision on it. An insolvent operator may have satellites still in orbit, with a disposal duty attached to its licence and no cash. We cover the US duty in our note on the FCC five-year deorbit rule.

Two US rules point the way, by analogy. The automatic stay does not stop a government enforcing its police and regulatory power, though it still restrains collecting money. And in Midlantic National Bank v New Jersey DEP, 474 US 494 (1986), the Supreme Court held that a trustee may not abandon property in breach of a state law “reasonably designed to protect the public health or safety from identified hazards”. Midlantic concerned hazardous waste on land. My reading is that a regulator could argue the same for a tumbling satellite, but this is untested.

The international position does not move at all. A sale does not change who the launching State is under the Liability Convention, so that State stays exposed even after a foreign buyer takes over. I suspect that is one reason regulators care who buys.

The fix nobody has switched on

The Space Protocol to the Cape Town Convention, adopted in Berlin on 9 March 2012, would create an international registry for security interests in space assets, modelled on the system for aircraft. UNIDROIT’s status list shows it is not in force. Paraguay acceded in November 2024 and the Democratic Republic of the Congo in June 2026, and it needs ten ratifications or accessions plus certification that the registry is fully operational. Burkina Faso, Germany, Saudi Arabia and Zimbabwe have signed but not ratified.

Even then, creditors would not have a free hand. Article XXVII limits their remedies against an asset delivering a registered public service.

What I would watch

The first is the next distressed constellation. A low Earth orbit operator with thousands of ageing satellites would test the disposal question in a way no case yet has.

The second is whether national rules start to address insolvency directly. India’s IN-SPACe rules, for example, make authorisations non-transferable without prior written approval and require authorisation for in-orbit sales.

The third is the Space Protocol count. Two parties in fourteen years is slow, but the latest accession came this year. Lenders should watch it, even if it will not help them soon.

Anuj KumarEditor-in-Chief

Anuj Kumar is the founder of Legal Desire Media and publishes Fashion Law Journal and Space Law Journal.

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