LightSquared disclosure OK’d; court pushes for consensual plan process

By Kali Hays

New York, Jan. 20 – LightSquared Inc. received approval on Jan. 20 of the disclosure statement related to its amended plan of reorganization from the U.S. Bankruptcy Court for the Southern District of New York.

During the hearing, the remaining objections of SP Special Opportunities, LLC (SPSO) related to language surrounding the methodology used in the valuation of LightSquared’s assets and a break-up fee trigger associated with the payout decision of each plan proponent were resolved, and the disclosure statement was determined to contain adequate information.

Upon filing its objection, SPSO claimed that the plan disclosure statement was “confusing or inadequately described.”

LightSquared also announced that it had executed a plan support agreement with MAST Capital Management LLC, whereby $41 million of its LightSquared claim will be purchased by SIG Holdings Inc., and an additional $89 million of the claim will be purchased by other plan proponents.

With the resolution of all remaining disclosure objections, the company proposed that the plan confirmation hearing should begin the week of March 9.

However, Judge Shelley Chapman proposed that, “after having time to reflect” and ascertaining that SPSO is “not happy” and will continue its objections through confirmation, a hearing on a fully consensual reorganization plan begin as soon as next week, considering “we’re about to embark on confirmation of a plan that no one really wants.”

“Last year Mr. Ergen told me emphatically that he doesn’t want to own this company. Mr. Falcone said that SPSO shouldn’t even be here. They snuck in. They’re a competitor. So, I think now is the time to look around for loose change in the sofa cushions, knock on all available doors. Now is the time to resolve all of these issues given the relationship of the parties,” Chapman said.

As previously reported, Charles Ergen is the chairman of Dish Network Corp., an affiliate of SPSO that holds over $1 billion in LightSquared debt, and Philip Falcone is the founder of Harbinger Capital Partners, LLC, which invested nearly $2 billion in LightSquared.

Judge Chapman went on to say that her suggestions of expeditious and serious plan negotiations have “nothing to do with what I feel about the plan, but rather what I feel is possible if everyone puts their hearts and pocketbooks towards actually resolving these plan issues.”

Plan terms

As previously reported, under the current plan the company will be New LightSquared LLC, and a “Reorganized LightSquared Inc.” will be an operating subsidiary upon emergence from bankruptcy.

The plan is based on a plan sponsorship agreement with Harbinger, Fortress Investment Group LLC, Centerbridge Partners LP and SIG Holdings, with Harbinger receiving 44.45% of equity in New LightSquared.

Upon the effective date of the plan, New LightSquared will issue 26.2% of its new common stock and $68.39 million of series B preferred interests to Fortress, and Centerbridge will receive 8.1% of new common stock and $21.12 million of series B preferred interests.

In satisfaction of its pre-bankruptcy claims, Harbinger will receive series A preferred interests in an amount equal to its subordinated claims, plus interest, plus $122 million and 44.45% of the new common stock in New LightSquared along with a call option to purchase 3% of new common interests.

As consideration for the reorganized LightSquared entities contributing assets to New LightSquared, the reorganized entities will receive 21.25% of the New LightSquared common stock, $100 million of series C preferred notes, $41 million of series B preferred notes and series A preferred notes equal to the allowed non-subordinated claims held by SIG as of the effective date.

SIG will also receive 100% of the common shares of the reorganized LightSquared.

Other existing preferred equity holders of LightSquared will receive a distribution of series C preferred interests of $27 million.

All claims of MAST Capital Management will be paid in full in cash or be purchased by SIG on or immediately following confirmation of the plan.

Specific treatment of other claims will be as follows:

•Holders of general unsecured claims and other priority claims will receive full cash payment of an allowed claim amount;

•Holders of other secured claims will receive full cash payment of an allowed claim or delivery of the collateral securing the claim and payment of interest, if any;

•Holders of LightSquared LP preferred equity interests will receive a proportionate share of $248 million of series C preferred stock of New LightSquared;

•Holders of pre-bankruptcy non-subordinated claims will receive a cash payment from SIG for the purchase of those claims, which will be converted into the reorganized exit facility;

•Holders of pre-bankruptcy LightSquared LP facility claims will receive tranche A second-lien exit term loans in a principal amount equal to the holders’ allowed amount as of the plan effective date;

•Holders of allowed SPSO claims will receive tranche B second-lien exit term loans in an amount equal to the allowed claim as of the plan effective date;

•Holders of all common equity and stock interests will not receive a distribution, and all intercompany claims will be dismissed under the plan.

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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