LightSquared inks deal for new plan and $1.65 billion DIP facility

By Caroline Salls

Pittsburgh, Feb. 18 - LightSquared Inc. reached an agreement with key stakeholders on a third amended plan of reorganization and related disclosure statement, "which enjoys overwhelming consensus and support from a substantial portion of LightSquared's existing stakeholders, enhances the transactions previously proposed under the second amended plan and places LightSquared in an even better position to reorganize and maximize value."

According to a motion filed Friday with the U.S. Bankruptcy Court for the Southern District of New York, LightSquared's emergence from Chapter 11 is no longer contingent on obtaining approval of its pending license modification applications, and the majority of the company's creditors will receive accelerated distributions shortly following confirmation of the third amended plan.

Specifically, LightSquared said the third amended plan calls for a $1.65 billion new debtor-in-possession facility from plan support parties, roughly $930 million of which will be converted into second-lien exit financing, $300 million of which will be converted into a reorganized LightSquared Inc. loan and $115 million of which will be converted into equity.

The plan also calls for at least $1 billion in first-lien exit financing, the issuance of new debt and equity instruments, the assumption of specified liabilities, the satisfaction in full of all allowed claims and equity interests with cash and other consideration and the preservation of LightSquared's litigation claims.

Plan changes

In summary, LightSquared said the amended plan incorporates the following modifications to the second amended plan:

• LightSquared's emergence is no longer conditioned on Federal Communications Commission regulatory approvals related to terrestrial spectrum rights;

• The "toggle" option for an alternate plan has been removed;

• Shortly following confirmation, LightSquared will enter into the new DIP facility, the proceeds of which will be used to fund its operations through the plan effective date and make pre-effective date distributions to holders of DIP facility claims, pre-bankruptcy LP facility non-SPSO claims, other than those converted into tranche B of the new facility and pre-bankruptcy facility non-subordinated claims;

• The new DIP loan claims will be satisfied by some combination of loans under the second-lien exit facility, loans under the reorganized LightSquared Inc. loan, equity interests in the new company and/or cash; and

• Pre-bankruptcy LP facility SPSO claims will be satisfied through a new note issued by the reorganized company, with the amount, priority and terms of the note subject to variation depending on court determinations and how claimants vote as a class on the plan.

If the class votes to accept the plan, the SPSO note will be issued in the amount of $1,105,500,000. If the class votes to reject the plan, the note will be issued in the amount equal to the original principal amount of the claims or as otherwise determined by the court.

Financing terms

According to a separate motion, the DIP facility would mature on the earliest of repayment in full of all of the obligations, Oct. 31, 2014, the closing of a sale of all or substantially all of the company's assets or stock, the plan effective date and termination or acceleration of the loans following default.

Interest will be either Eurodollar plus 1,100 basis points or Base rate plus 1,000 bps.

J.P. Morgan Securities LLC is the lead arranger and bookrunner.

A hearing on the DIP financing motion is scheduled for March 17.

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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