LightSquared reaches agreement on terms of coming reorganization plan

By Kali Hays

New York, Nov. 1 – LightSquared Inc. said it has negotiated principle terms of a combined LightSquared Inc. and LightSquared LP Chapter 11 reorganization plan with creditors SP Special Opportunities LLC (SPSO) and Charles Ergen, MAST Capital Management LLC, J.P. Morgan Securities LLC and the LightSquared LP secured lenders during a Monday status conference held at the U.S. Bankruptcy Court for the Southern District of New York.

Equityholder Harbinger Capital Partners LLC is not in agreement with the terms of the prospective plan, but representatives of the equityholder said it would be “happy to engage” in further discussions with the debtor parties and would remain open to the possibility of a fully consensual plan.

While the debtor parties agreed to continue discussions with Harbinger, the equityholder said that the current terms were “untenable” and that moving forward with a plan “will not be without controversy.’

LightSquared representatives are hoping to file the plan and related disclosure statement by the middle of next week and proposed that a confirmation hearing be scheduled for Dec. 15 once the plan is filed.

Judge Shelley Chapman said she would wait until a plan is filed to schedule any hearing, but expressed concern over “such tight timing” when Harbinger’s current attitude ensures an “incredibly contested confirmation hearing.”

Plan details

According to representatives of LightSquared and the LP lenders, the agreed-upon framework for the plan contemplates a new working capital facility to be raised of at least $750 million, but upsizable to $1 billion with a second-lien facility of existing LP debt equaling $2.2 billion.

Principle terms of the prospective plan include the following:

• SPSO will receive $1 billion of new second lien debt and an additional 60% of common equity of the reorganized company equaling about $300 million;

• LP lenders will receive second lien five-year notes based on claim amounts. Interest will be PIK at the higher of 10% plus 200 basis points;

• MAST will receive a full cash payment on its debtor-in-possession loan amount and pre-bankruptcy claims;

• $189 million will be put into an escrow funded by JP Morgan and the LP lenders for the full payment of Harbinger’s secured subordinated debt pending approval of the claim;

• For funding the Harbinger escrow and committing to a $450 million investment in the reorganized company, JP Morgan will receive 31.9% of common equity in the reorganized company and the right to appoint one of five board members; and

• LP lenders will receive 7.8% of new common equity and warrants for up to 15% of the reorganized company.

The plan will also include full third-party releases for SPSO and Charles Ergen and a commitment from all of the approving parties to seek a conclusion of all pending litigation with Harbinger.

SPSO will also be reimbursed for expenses related to the plan from Jan. 1, 2014 through plan confirmation.

A further status conference is scheduled for Nov. 14.

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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