As the dust settles from Charlie Ergen’s failed run at US telcos Sprint and Clearwire, the DTH veteran is set for yet another showdown – this time with satellite/terrestrial venture LightSquared.
An ad hoc group of LightSquared’s lenders, which…
As the dust settles from Charlie Ergen’s failed run at US telcos Sprint and Clearwire, the DTH veteran is set for yet another showdown – this time with satellite/terrestrial venture LightSquared.
An ad hoc group of LightSquared’s lenders, which recently brought in an affiliate of Ergen as its largest member, is trying to stop the company from securing a third extension to the right to exclusively control its Chapter 11 bankruptcy reorganisation.
That right expires on 15 July, and LightSquared owner Harbinger Capital Partners has been using this time to find a way around the spectrum interference issues that prevent it from launching commercially. Amid positive signs for a potential spectrum sharing deal, Harbinger recently agreed a multibillion dollar financing deal with Jefferies that would enable its Chapter 11 exit.
However, LightSquared said in court filings that this plan had been set back by Ergen’s apparent moves to game proceedings by being slow to close certain debt trades. It claimed this made it difficult to identify which parties it needed to negotiate with, resulting in delays.
“The upshot of these recent events has impaired LightSquared’s ability to negotiate a plan of reorganisation,” stated the company.
In June 2013, the ad hoc group held roughly US$1.4bn of around US$1.7bn in prepetition debt in LightSquared LP, the group’s main operating unit, with the Sound Point investment firm Ergen is affiliated with owning the majority of that.
Alongside this, Ergen made a US$2bn offer earlier this year for LightSquared’s spectrum.
LightSquared said, “in the past few months, it has becoming increasingly obvious that acquiring LightSquared and its spectrum out of a bankruptcy case has become Ergen’s primary focus”, adding that it believed he has already held discussions with regulators about plans for the frequencies.
But because it regards Ergen as a competitor through his control of DTH giant Dish Network, which is also looking to deploy an LTE network on what was once satellite spectrum, the company claims he is not eligible to acquire the company under bankruptcy rules.
Exit financing to be split
Meanwhile, it has emerged that the US$3bn senior secured exit financing deal LightSquared is arranging with Jefferies could be split into two tranches.
Reports suggest a US$2bn first-lien loan will be syndicated by Jefferies, with Harbinger handling the US$1bn second-lien tranche.
The four-year first-lien portion will offer an 11% coupon payable in cash and in kind, with lender commitments due on 9 July, reported Reuters.
It will be offered at a discount price of 98.5 and lenders will receive upfront warrants for 10% of fully diluted ownership, added the report.
Lenders would reportedly not be required to fund the exit loans if LightSquared fails to secure regulatory approvals to roll out its network.
When the exit deal was first outlined in June, the agreement included a US$80m commitment from Harbinger to fund fees connected to the undisclosed loan.
LightSquared listed around US$4.48bn in assets and US$2.29bn in liabilities as of 29 February 2012. It is continuing to be financially advised by Moelis & Company.
