A group of LightSquared’s lenders has filed a bankruptcy reorganisation plan that calls for an auction of its main assets, kicking off with a US$2.2bn bid from an entity owned by Charlie Ergen’s DTH giant Dish Network.
The ad hoc group of lenders,…
A group of LightSquared’s lenders has filed a bankruptcy reorganisation plan that calls for an auction of its main assets, kicking off with a US$2.2bn bid from an entity owned by Charlie Ergen’s DTH giant Dish Network.
The ad hoc group of lenders, which also includes an affiliate of Ergen, submitted its plan after the satellite/terrestrial venture lost its right to exclusively control Chapter 11 proceedings with its own reorganisation proposal.
It wants the ‘stalking horse’ bid for LightSquared LP, the company’s main operating unit that includes its 46 MHz of L-Band MSS spectrum, to open the doors for an auction this December.
LightSquared filed for Chapter 11 protection last year after some of this spectrum was found to interfere with GPS technology. The company, owned by hedge fund Harbinger Capital Partners, is still seeking regulatory permission to swap the afflicted spectrum with the government.
Harbinger’s restructuring plan, which includes a US$3bn exit financing deal with Jefferies, is largely dependent on these regulatory clearances.
The stalking horse bid is not contingent on such approvals and would be made in cash, although it is subject to a US$66.6m break-up fee if the bankruptcy court allows the auction to go ahead.
In court filings the lenders said Dish will guarantee the bidder’s “performance of certain financial obligations”.
At US$2.2bn, the starting offer would be enough to pay the company’s US$1.7bn of debt in full.
However, holders of US$235.6m in LightSquared LP preferred shares would receive little or nothing.
In addition, the move would split LightSquared LP from LightSquared Inc, an entity that is 96%-owned by Harbinger. LightSquared Inc is only an indirect owner of the LP unit.
Ergen and Harbinger head Philip Falcone have been locking horns over the issue for months.
Earlier in July, LightSquared accused Ergen of gaming Chapter 11 proceedings by being slow to close certain debt trades, causing its own reorganisation plan to be delayed.
The company also argues that Ergen’s ties to Dish mean he is not eligible to acquire it over bankruptcy rules that prohibit debt trades by strategic competitors.
After admonishing the lenders lawyers’ for not telling her in advance about the reorganisation plan, bankruptcy judge Shelley Chapman reportedly set a 6 December deadline for competing bids. A hearing to confirm which reorganisation plan will go ahead is set to begin on 10 December, according to court reports.
LightSquared has said it expects competing proposals to reorganise its assets.
