Harbinger files plan for LightSquared cases, eyes Dec. 31 emergence

By Caroline Salls

Pittsburgh, Sept. 3 - Harbinger Capital Partners, LLC filed a plan of reorganization for LightSquared Inc. and its subsidiaries, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the Harbinger plan, all creditors and equity interest holders will be paid in full through the distribution of cash and new secured notes issued by LightSquared Inc. and LightSquared LP and new unsecured notes issued by LightSquared Inc.

In addition, Harbinger said it reached an agreement with Melody Capital Advisers, LLC to serve as lead arranger on an exit facility, which will be used to fund plan distributions.

Harbinger said the exit facility, which is subject to conditions and documentation, will be for at least $500 million.

Under the Melody agreement, LightSquared can access up to $190 million of the exit financing before Dec. 15 as debtor-in-possession financing, allowing the company to fund its operations through June 30, 2014.

Faster option

According to the disclosure statement, the Federal Communications Commission review of the Harbinger plan should take less time than the reviews of the other plans filed in LightSquared's case, which require a sale of the company's spectrum assets to a new operator.

As a result, Harbinger said its plan could take effect by Dec. 31.

Harbinger said it believes its plan is the only one of the ones proposed that could take effect in this timeframe.

Plan terms

Terms of the Harbinger plan would include the following:

• LightSquared LP will obtain a new $2,183,000,000 three-year first-lien term loan. Interest will be 9% payable in kind during the first year, 10% payable in kind or 8% payable in cash during the second year and 11% payable in kind or 9% payable in cash during the third year;

• LightSquared Inc. will obtain a six-year $573 million subordinated loan facility, which will bear interest at 14%, payable in kind;

• Harbinger will make a $259 million capital contribution through the voluntary contribution of $159 million of pre-bankruptcy facility claims in exchange for new common shares and by backstopping a $100 million rights offering for holders of existing common stock;

• DIP facility claims, administrative expense claims, tax priority claims, LightSquared Inc. pre-bankruptcy credit facility claims, other priority claims and general unsecured claims will be paid in full in cash;

• Holders of LightSquared LP pre-bankruptcy credit facility claims will be paid in full from a share of a new first-lien term loan facility;

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing the claims;

• Intercompany claims and intercompany interests will be reinstated;

• Holders of existing preferred stock equity interests will be paid in full from new subordinated loan facility notes; and

• Holders of existing common stock equity interests will receive new common shares.

Company plan

As previously reported, LightSquared and an informal group of LightSquared LP lenders also filed plans for the Chapter 11 cases.

Treatment of creditors under LightSquared's plan would include the following:

• Priority claims will be paid in full in cash;

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing their claims;

• Holders of pre-bankruptcy non-subordinated facility claims will receive a share of plan consideration remaining after priority claims are paid in full;

• Holders of pre-bankruptcy subordinated claims will receive a share of plan consideration remaining after priority and non-subordinated facility claims are paid in full;

• Holders of general unsecured claims will receive a share of plan consideration remaining after priority and facility claims are paid in full;

• Holders of existing preferred units will receive a share of plan consideration remaining after all other claims are paid in full;

• Holders of common interests will receive a share of plan consideration remaining after all other claims and preferred interests are paid; and

• Intercompany interests will be reinstated.

LP lenders' plan

Treatment of creditors under the LP lender group's plan is slated to include the following:

• Administrative claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• Holders of LP facility secured claims will receive a share of plan consideration after payment of priority and general LP unsecured claims, provided that, if the stalking horse bidder under the lenders' proposed $2.2 billion sale is the high bidder and the effective date occurs, the plan consideration distributed to the holders of LP facility secured claims will equal $2,102,000,000 in total;

• Holders of other LP secured claims will either be paid in full in cash or receive other treatment that renders the claims unimpaired;

• Holders of general LP unsecured claims will receive a share of an unsecured plan distribution. To the extent these claims exceed the unsecured claims distribution, these creditors will also receive any plan consideration remaining after payment of secured claims;

• Holders of LP preferred unit interests will receive a share of any plan consideration remaining after payment in full of unsecured claims, including the excess unsecured claim distribution; and

• Holders of LP common equity interests will receive a share of any plan consideration remaining after payment of preferred unit interests.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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