US satellite/terrestrial venture LightSquared is seeking bankruptcy court approval to attach a US$200m breakup fee to its latest restructuring plan. The ‘alternative transaction fee’ would be split amongst the plan’s main backers, with private…
US satellite/terrestrial venture LightSquared is seeking bankruptcy court approval to attach a US$200m breakup fee to its latest restructuring plan.
The ‘alternative transaction fee’ would be split amongst the plan’s main backers, with private equity firms Fortress and Centerbridge receiving 47.65% and 14.71%, respectively, and JP Morgan affiliate SIG Holdings 37.65%
Hedge fund Harbinger Capital Partners, which is LightSquared’s current majority equity holder and would see its stake cut to 44.4% under the restructuring plan it is supporting, has agreed to not take any part of the fee.
LightSquared said in a court filing that, unlike a typical breakup fee, its alternative transaction arrangement is subordinated to payment of all claims and equity interests other than common stock equity interests in a smaller part of the company called LightSquared Inc.
“The alternative transaction fee is payable only on a subordinated basis and in the event that LightSquared closes a transaction through which all constituents other than holders of Inc. common stock equity interests are paid in full, in cash, or otherwise receive treatment acceptable to them,” it said.
The latest restructuring plan was forged in December, involves US$1.25bn in exit financing, and would give Fortress and Centerbridge stakes of 26.2% and 8.1% in the reorganised company, respectively, while current investors in LightSquared Inc would get the rest of the equity that isn’t taken by Harbinger.
It came a month after a separate plan was reached that would have wiped out Harbinger’s equity completely and transferred a majority stake to LightSquared’s largest creditor, an investment vehicle owned by Charlie Ergen, chairman of US DTH giant Dish Network.
Under the new plan, Harbinger would keep a share of LightSquared but would have no members on its board. The more than US$1bn in debt from Ergen’s SPSO vehicle would be repaid through a five-year note.
However, SPSO has not given its support to the restructuring proposal, one of several that LightSquared has seen since entering voluntary Chapter 11 bankruptcy in May 2012.
Its restructuring process has also been mired in legal action as Ergen and Harbinger head Philip Falcone battle for control of the group’s spectrum assets.
Harbinger has said it would drop the various lawsuits it has launched over the years if its restructuring plan goes ahead.
LightSquared began its restructuring process after its spectrum was found to interfere with GPS technology. It is in talks with regulators to find a way to utilise its frequencies, which have recently seen their potential value boosted by the ongoing multibillion dollar US auction of AWS-3 spectrum.
