LightSquared has unveiled a new bankruptcy deal that would see the wireless venture being majority owned by a group led by JP Morgan and two private equity firms.
That group, backed by the investment bank and PE firms Cerberus Capital Management and…
LightSquared has unveiled a new bankruptcy deal that would see the wireless venture being majority owned by a group led by JP Morgan and two private equity firms.
That group, backed by the investment bank and PE firms Cerberus Capital Management and Fortress Investment Group, would own 74% of the venture while current majority equity owner Harbinger Capital Partners would be left with about 12.5%.
In return, JP Morgan, Cerberus and Fortress would inject US$1.45bn of new liquidity into LightSquared. Another US$300m would come from other investors in the group.
It would see LightSquared’s existing lenders with around US$1bn of debt being repaid in cash while the venture’s largest creditor, satellite TV mogul Charlie Ergen, would get a mix of US$470m in cash and an unsecured note worth at least US$492m.
Ergen, who is also chairman of US DTH giant Dish Network, has not agreed to the plan and yesterday his lawyers called for a new trial to judge its fairness.
An earlier plan that proposed repaying Ergen fully in debt was rejected by LightSquared’s bankruptcy court judge earlier this year because it was deemed unfair.
However, Judge Shelley Chapman also ruled that some of the debt held by Ergen’s SPSO vehicle can be subordinated below other lenders because of the way it was acquired. She concluded that at least some of SPSO’s debt purchases were made on behalf of Dish, which also owns satellite/terrestrial spectrum and therefore goes against a credit agreement LightSquared has that prohibits such an action by a competitor.
LightSquared has been under Chapter 11 bankruptcy protection for more than two years now and, after rejecting its previous plan, Chapman sent its equity and debt owners into mediation to force out an agreement.
However, it was recently revealed that Ergen had left the mediation process before it was due to end on 24 June, prompting criticism from mediator Judge Robert Drain.
Drain added in a letter dated 27 June that LightSquared’s latest bankruptcy plan “should be confirmable” even without the support of SPSO.
The venture filed for voluntary reorganisation back in May 2012, giving it breathing room from creditors while it seeks a way around GPS interference concerns that are stopping it from launching an LTE network.
Inmarsat issues LightSquared default notice
British MSS operator Inmarsat today issued a default notice to LightSquared after it failed to make a quarterly spectrum leasing payment totalling around US$9.1m on 1 July.
LightSquared has been burning through cash during its prolonged bankruptcy process, putting pressure on its ability to pay the operator for using some of its frequencies.
“This notice triggers a period of 60 calendar days during which LightSquared can remedy the payment before Inmarsat is entitled to enforce its rights and remedies under the agreement for payment default, including pre-agreed spectrum arrangements and termination of certain LightSquared rights under the cooperation agreement,” stated Inmarsat in a stock exchange filing.
LightSquared agreed to restart quarterly payments on 31 March 2014, just weeks before its bankruptcy court judge rejected a reorganisation plan for being unfair to Ergen.
Inmarsat said today’s announcement does not affect the revenue generation of its MSS and solutions businesses.
