LightSquared’s bankruptcy judge has rejected the US satellite/terrestrial venture’s restructuring plan as she said it was unfair on its largest debt holder.
But Judge Shelley Chapman also ruled that some of the US$1bn of debt held by Charlie Ergen,…
LightSquared’s bankruptcy judge has rejected the US satellite/terrestrial venture’s restructuring plan as she said it was unfair on its largest debt holder.
But Judge Shelley Chapman also ruled that some of the US$1bn of debt held by Charlie Ergen, the chairman of DTH giant Dish Network, can be subordinated below other lenders.
LightSquared’s proposal would have repaid all of Ergen’s claims over several years in debt, rather than cash like its other lenders. Chapman said it was too risky to conclude that the group is worth enough to pay him back over this length of time.
The venture now needs to come up with a new plan that will treat Ergen’s claims differently so that it can escape its two-year Chapter 11 process.
Its failed proposal had outlined US$2.35bn in new loans and was backed by Fortress Investment Group, Melody Partners, JP Morgan and its current equity owner Harbinger Capital Partners.
Chapman also concluded yesterday that at least some of the debt purchases by Ergen’s SPSO investment vehicle were made on behalf of Dish, which goes against a credit agreement LightSquared has that prohibits such an action by a competitor.
However, she refused to wipe out the debt entirely, or award LightSquared and Harbinger head Philip Falcone damages, because they failed to go after Ergen on the transactions until it was “too late in the game”.
Dish bid US$2.2bn last year to buy LightSquared’s main spectrum assets, after Ergen had built up his debt position, only to withdraw its offer at the start of 2014.
GPS interference concerns over this spectrum are what led to the company filing for voluntary reorganisation back in May 2012. It is still talking to regulators to find a way around the issue.
According to TMF Associates principal Tim Farrar, LightSquared’s stakeholders could now be heading for lengthy mediation as they draw up a new restructuring plan. This means more DIP financing and a risk to a spectrum leasing payment that LightSquared is due to pay British MSS operator Inmarsat in June.
