A unit of US satellite/terrestrial venture LightSquared has reached a deal for US$210m in fresh financing to keep it afloat until the end of the year as its restructuring process drags on.
The debt for LightSquared Inc will replace a…
A unit of US satellite/terrestrial venture LightSquared has reached a deal for US$210m in fresh financing to keep it afloat until the end of the year as its restructuring process drags on.
The debt for LightSquared Inc will replace a debtor-in-possession loan which has a maturity date that could have occurred as early as 31 May, according to a court filing from LightSquared’s financial adviser Moelis.
Two JP Morgan units, private equity firm Centerbridge Partners, and hedge fund Harbinger Capital Partners, which currently owns most of the venture’s equity, will provide the financing.
Moelis managing director Mark Hootnick said the new debt’s terms are substantially the same as its existing DIP facility, including the 17.5% rate of interest.
The LTE venture has been racking up significant losses since filing for voluntary reorganisation under Chapter 11 bankruptcy protection in May 2012, after its frequencies were found to interfere with GPS systems.
A federal judge recently threw out a lawsuit from Harbinger that claimed Garmin and other GPS makers caused its bankruptcy. However, Judge Paul Berman said LightSquared’s similar but separate negligent-misrepresentation and constructive-fraud claims could proceed.
Berman found it plausible that Garmin, Trimble, and Deere – founding members of the Coalition to Save our GPS lobby group that was set up to stop LightSquared from using its interference-hit spectrum – omitted the full truth through conclusory, vague and open-ended representations.
Welcoming the move, LightSquared reiterated its position “that any interference issues are caused by the design of GPS receivers and not the design of LightSquared’s proposed network”.
Deere said it does not comment on active litigation, while Trimble and Garmin did not respond to press enquiries.
Meanwhile, Harbinger has lodged an appeal to a bankruptcy court decision in October that blocked it from eliminating a guaranty on US$1.7bn of debt, owed to a group of LightSquared’s secured lenders. That refusal hurt Harbinger’s attempts to restructure the venture on its own terms.
LightSquared’s latest restructuring proposal, if approved, would cut Harbinger’s stake to 44% and give it no members on the board. Centerbridge and PE firm Fortress would get stakes of 8.1% and 26.2% in the reorganised company, respectively.
