US satellite/terrestrial venture LightSquared and its creditors are being forced into mediation after they were unable to agree a restructuring plan by yesterday’s deadline.
A lawyer for an independent committee supervising its Chapter 11…
US satellite/terrestrial venture LightSquared and its creditors are being forced into mediation after they were unable to agree a restructuring plan by yesterday’s deadline.
A lawyer for an independent committee supervising its Chapter 11 restructuring said some progress had been made on a deal, which involves significant financing from a third party, but it needed help “getting across the finish line”, according to court reports.
The move comes after LightSquared’s bankruptcy judge rejected the venture’s previous plan because it was unfair on its largest debt holder Charlie Ergen, chairman of DTH firm Dish Network.
The proposal would have repaid Ergen’s around US$1bn in claims over several years in debt, rather than cash like LightSquared’s other lenders. It also 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.
Although that proposal was shot down, Judge Shelley Chapman did rule that some of the debt held by Ergen can be subordinated below other lenders. This came as she concluded that at least part 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.
LightSquared filed for voluntary reorganisation back in May 2012, giving it breathing room from its creditors while it seeks a way around GPS interference concerns that are stopping it from launching an LTE network.
But the group has been burning through cash during its two-year bankruptcy, and the current loan package it has to keep itself afloat expires on 15 June.
A lengthy mediation process could require more DIP financing, and also puts at risk a spectrum leasing payment that LightSquared is due to pay British satellite operator Inmarsat next month.
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