LightSquared amended plan confirmed; will pay SPSO with exit financing

By Kali Hays

New York, March 27 – LightSquared Inc. won confirmation of its second amended joint plan of reorganization on Friday with an order from the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company faced constant opposition in the confirmation process from its pre-bankruptcy lender SP Special Opportunities LLC (SPSO), owned and operated by Charles W. Ergen, chairman of Dish Network Corp.

SPSO and its representatives claimed that the lender’s treatment under the plan was discriminatory and said that it would only settle for a repayment of its debt that contemplated its full value.

Another lender, Solus Alternative Asset Management LP also opposed LightSquared’s plan and filed a competing plan in early March that eventually included a plan support agreement with SPSO, Charles Ergen and Cerberus Capital Management, LP.

In order to fully satisfy SPSO’s secured lender claim totaling over $1 billion, LightSquared obtained a commitment from Jeffries Finance LLC to provide $1.52 billion in second-lien exit financing. The full amount of the financing will settle the aggregate principal amount of SPSO’s claim, assuming LightSquared’s proposed reorganization plan goes into effect by Dec. 15, 2015.

The exit financing will have a five-year term, bear interest at the higher of 12% and 300 basis points greater than the interest rate of a separate working capital facility, payable in kind, and will not be callable for two years after the effective date of the plan.

On the effective date of the plan, Jeffries will receive second-lien exit term loans in a principal amount equal to $174.23 million, reimbursement of related expenses, along with an arrangement fee of “a few million dollars.”

LightSquared will also retain Jeffries as its joint lead arranger and bookrunner for the company’s first-lien exit facility and “any other similar financing issued,” according to the financing motion.

A separate court order approved the exit financing on Friday.

With the exit financing commitment, Solus withdrew all of its objections to LightSquared’s plan on March 26, and its opposing plan was dismissed by the court.

In addition, other creditors that had previously voted against the reorganization plan, including Providence TMT Special Situations Fund LP, Providence TMT Debt Opportunity Fund II LP, Centaurus Capital LP and Keith Holst, were allowed to switch their votes to accepting the plan, according to separate court orders.

All other objections to the amended plan that were not mutually resolved were overruled, according to the confirmation order.

Plan details

According to the confirmed plan, the company will emerge as New LightSquared LLC and a “Reorganized LightSquared Inc.” will be created as an operating subsidiary.

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

On the plan effective date, the plan supporters will also provide New LightSquared with a working capital facility totaling $1.25 billion, according to the confirmation order.

The working capital loans will be secured by senior liens on all assets of 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 8.1% of new common stock and $21.12 million of series B preferred interests to Centerbridge.

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, LLC 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 from LightSquared post-bankruptcy interest;

• 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 $270 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 or elect to receive a partial cash payment of its proportionate share of $400 million in combination with second-lien paper; and

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

DIP financing

In conjunction with the confirmation order, LightSquared also obtained approval of $210.81 million in new investor, replacement debtor-in-possession financing from the court.

As previously reported, the new investor loans will replace the company’s existing DIP facility set to mature on May 31, 2015 and carry LightSquared through its post-confirmation period.

The financing is comprised of tranche A new money loans totaling $80.31 million from “New Inc.” DIP lenders, tranche B loans totaling $89.5 million from the refinanced obligations and acquired DIP claims of Fortress Investment and Centerbridge Partners, and tranche C loans totaling $41 million from the conversion of purchased DIP claims of SIG Holdings as an affiliate of LightSquared’s current lender, JPMorgan Chase.

Part of the obligations under the existing DIP facility will be paid through the conversion of the acquired DIP claims of Fortress, Centerbridge and SIG.

Proceeds from the tranche A loans will be used to repay all of the existing claims of MAST Capital that will not be acquired under the proposed plan.

The new financing will mature on the earlier of Dec. 30, 2015, the closing date of a sale of all or substantially all company assets or stock, the effective date of the reorganization plan and an acceleration of the new loans following an event of default, according to the motion.

Interest on the loans will be 17.5% payable in kind.

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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