LightSquared has filed a restructuring plan that does not rely on FCC approval for its LTE network but poses an ultimatum for its largest debt holder Charlie Ergen.
The satellite/terrestrial venture’s Chapter 11 proposal includes US$2.35bn in new…
LightSquared has filed a restructuring plan that does not rely on FCC approval for its LTE network but poses an ultimatum for its largest debt holder Charlie Ergen.
The satellite/terrestrial venture’s Chapter 11 proposal includes US$2.35bn in new loans and is backed by Fortress Investment Group, Melody Partners, JP Morgan and its current equity owner Harbinger Capital Partners.
But Ergen, who is also chairman of US DTH giant Dish Network, would be repaid with a new US$1.1bn debt instrument rather than cash like LightSquared’s other existing lenders. If Ergen’s SP Special Opportunities (SPSO) vehicle does not agree to the scheme, this new debt could be reduced and possibly further subordinated by not being secured by collateral.
Further complicating the matter is separate legal action that Ergen still faces from the venture over whether his debt buys were improper in the first place.
The ultimatum is the latest clash for supremacy between Ergen and Harbinger’s head Philip Falcone, with the former managing to wade into LightSquared’s new DIP loan earlier this month.
A court hearing has been scheduled for 17 March to consider approving the bankruptcy plan, and LightSquared has called on lenders to vote on the scheme by 3 March.
Of the new debt, US$1.35bn will come from a ‘New DIP Tranche A Facility’ and a further US$1bn of senior loans will be raised to fund the Chapter 11 exit. Meanwhile, the plan calls for US$300m to be raised from existing LightSquared lenders rolling back their pre-bankruptcy claims.
The financing package’s size is less than the Fortress-led US$4bn proposal that LightSquared recently abandoned to seek a compromise with all its creditors, because this one envisages breaking out of Chapter 11 sooner. The earlier plan was tied to the company finding a way around its spectrum interference issues, which have been blocking it from rolling out a network and helped push it to file for voluntary reorganisation back in May 2012.
Last month, Dish withdrew a US$2.2bn bid for LightSquared’s main spectrum assets – a move that would have likely wiped out Harbinger’s equity. Ergen’s holdings in both Dish and SPSO helped spur the legal action over the debt purchases.
LightSquared had listed around US$4.48bn in assets and US$2.29bn in liabilities as of 29 February 2012 as part of its bankruptcy procedures. In a revised valuation submitted by its financial adviser Moelis & Co for the new reorganisation plan, the bank provided a range of US$6.2bn and US$9.1bn for the assets as of an assumed effective date of 31 October 2014.
