LightSquared lender Solus proposes competing plan of reorganization

By Caroline Salls

Pittsburgh, Feb. 26 – LightSquared Inc. lender and preferred unitholder Solus Alternative Asset Management LP filed a competing plan of reorganization and related disclosure statement for LightSquared’s Chapter 11 case Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

“The plan includes many positive attributes that will benefit LightSquared and all of its stakeholders in a more streamlined manner, and with more proportional outcomes, than would otherwise result from the existing joint plan,” Solus said in the disclosure statement.

Plan comparison

Solus said its plan applies to both the LightSquared Inc. and LightSquared LP debtors and affords the same or better treatment for all claims and equity interests than the company’s existing joint plan.

Solus said its plan is based on its provision of fresh capital in the form of up to $742 million of new debtor-in-possession financing to the LightSquared Inc. debtors, $155 million of which can be re-advanced to the LP debtors through an intercompany loan and $587 million of which would be converted into preferred equity.

The plan also calls for a $1.25 billion first-lien exit financing facility, with a full backstop commitment by Solus.

As part of its DIP funding proposal, Solus said it has committed to provide the Inc. debtors with up to $155 million in additional liquidity that can be re-advanced to the LP debtors to cover the LP debtors’ operations between the plan confirmation date and the effective date.

Solus said this removes uncertainty from the conditional sources of capital included in the existing joint plan.

As with the company’s joint plan, effectiveness of Solus’ plan is not conditioned on LightSquared’s receipt of a series of Federal Communications Commission and related regulatory approvals for terrestrial spectrum rights.

The Solus plan also provides for superior treatment to holders of LightSquared Inc. preferred stock and LP preferred units than the company’s plan, according to the disclosure statement, while affording existing LightSquared Inc. common stockholders a recovery in the form of 1% of the reorganized company’s common interests, in addition to increasing Harbinger Capital Partners, LLC’s share of reorganized company interests.

Solus said its plan also gives general unsecured creditors an opportunity to receive post-bankruptcy interest and further increases the value of the LightSquared estates by retaining significant net operating losses and other tax attributes.

The plan also leaves the debtors with significantly more balance sheet cash than would be provided under the existing joint plan, Solus said.

Solus creditor treatment

Treatment of claims will include the following:

• Holders of 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 the claim;

• Holders of pre-bankruptcy LightSquared Inc. facility subordinated claims will receive a share of new series B preferred interests and 47% of reorganized LightSquared Inc. common interests in exchange for the subordinated facility claims, the termination of liens securing those claims and Harbinger’s contribution of litigation and all existing common stock interest it owns;

• Holders of pre-bankruptcy LP facility non-SP Special Opportunities, LLC (SPSO) claims will receive tranche A second-lien exit term loans;

• Holders of pre-bankruptcy LP facility SPSO claims will receive tranche B second-lien term loans;

• Holders of general unsecured claims will receive cash either in the full principal amount of the claim in a single installment without interest or in the full principal amount plus interest in two installments.

The first installment would be received on the plan effective date in the amount of 50% of the claim plus all interest that has accrued from the bankruptcy filing date to the effective date.

The second installment would come on the six-month anniversary of the effective date and be equal to 50% of the claim plus all interest accrued from the effective date to the second payment date;

• Holders of existing preferred units and interests will receive new series C preferred interests at an original liquidation preference equal to the liquidation preference of the existing LightSquared Inc. preferred stock calculated as of the plan effective date, but without any prepayment or redemption premium;

• Existing LP common units will be reinstated;

• Holders of other existing LightSquared Inc. common stock will receive a share of 1% of the reorganized company’s common interests;

• Holders of LightSquared Inc. intercompany claims will receive no distribution;

• LightSquared LP intercompany claims will be reinstated, but holders will receive no distribution; and

• Intercompany interests will be reinstated.

Company plan terms

As previously reported, LightSquared’s joint 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.

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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