US satellite/terrestrial venture LightSquared is close to securing a debtor-in-possession loan with a unit of US Bancorp (USB), as it agrees conditions with other lenders for access to its cash on hand.
A loan has been agreed in principle with the USB…
US satellite/terrestrial venture LightSquared is close to securing a debtor-in-possession loan with a unit of US Bancorp (USB), as it agrees conditions with other lenders for access to its cash on hand.
A loan has been agreed in principle with the USB unit, which represents a group of lenders holding around US$320m of debt, according to local reports citing Matthew Barr, a Milbank lawyer acting on behalf of LightSquared.
Barr did not disclose any details of the loan, except to say on 12 June that a filing was expected to be submitted in a matter of days.
Both LightSquared, which entered Chapter 11 bankruptcy protection on 15 May following its ongoing GPS spectrum interference concerns, and Milbank were unable to comment before the press deadline.
Meanwhile, LightSquared has settled its fight with another group of lenders over access to US$190m of cash on hand, after the company warned it faced liquidation without sufficient access to the capital.
The lenders, which include hedge funds Appaloosa Management, Fortress Investment Group and Silver Point Capital, represent around US$1bn of debt. They were calling for strict budget controls on the cash to protect their resources.
Court reports explain that, after hearings were adjourned three times to allow the parties to hammer out a deal, the lenders permitted LightSquared to access the cash in return for being paid US$6.25m a month. Under the conditions, the company would have to adhere to a budget of no more than 15% variance on operating expenses. In addition, the lenders have the option of returning the matter to court to terminate the use of the cash.
Barr was quoted telling Judge Shelley Chapman, at the US Bankruptcy Court in Manhattan, that the cash collateral will allow LightSquared to fund operations until September 2013.
Earlier in June, LightSquared won another heated battle with its lenders, when Chapman granted the company’s request to restrict the trading of its debt and stock during the restructuring process. LightSquared had successfully argued that it risked losing out on more than US$1.5bn in tax breaks if trading was permitted, because it could result in a change of ownership of the company. Currently, its equity is majority-owned by Philip Falcone and his New York hedge fund Harbinger Capital Partners.
LightSquared listed US$4.48bn in assets and US$2.29bn in liabilities in its initial bankruptcy filing. The company is using the Chapter 11 process to keep creditors at bay, while it tackles the regulatory obstacles that are currently prohibiting the launch of its nationwide 4G wireless network.
Alvarez & Marsal is financially advising LightSquared.
