LightSquared new plan calls for common equity auction, SPSO compromise

By Caroline Salls

Pittsburgh, Aug. 7 – LightSquared Inc. and an informal committee of LP debtor lenders filed a joint Chapter 11 plan Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company’s previous plan was denied confirmation earlier this year largely because of the proposed treatment of the claims of SP Special Opportunities LLC (SPSO).

Judge Shelley C. Chapman declined to designate SPSO’s vote to reject the plan as a vote that was not made in good faith.

The plan filed Thursday calls for the potential satisfaction in full of senior secured claims and offers a compromised treatment for pre-bankruptcy LP facility SPSO claims that would avoid costly litigation related to subordination of those claims.

The plan also provides for potential recoveries to junior stakeholders through an auction of new LightSquared common equity that is otherwise distributable to holders of pre-bankruptcy LP facility non-SPSO claims, pre-bankruptcy LP Facility SPSO claims, if applicable, and pre-bankruptcy LightSquared Inc. facility non-subordinated claims, if applicable.

The junior stakeholders would receive the recoveries if the other specified claims and debtor-in-possession facility claims are first satisfied in full in cash from the auction proceeds.

Creditor treatment

Specific creditor treatment will include the following:

• Administrative claims, priority tax claims and other priority claims will be paid in full in cash;

• Holders of LightSquared Inc. and LightSquared LP DIP facility claims will receive a share of new DIP facilities, provided, however, that if they object that that treatment, these creditors will receive a share of cash proceeds from the facilities;

• Holders of new DIP facility claims will receive new working capital facility loans, provided, however, that they will receive auction proceeds instead if a sale resulting from the auction closes.

These creditors will receive cash if they object to the proposed plan treatment;

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing the claims;

• Holders of pre-bankruptcy LP facility non-SPSO claims and pre-bankruptcy LightSquared Inc. facility non-subordinated claims will receive a share of $1 billion in new terms loans and 100% of new common equity. If holders of pre-bankruptcy LP facility SPSO creditors vote to reject the plan, the term loan share for the non-SPSO and LightSquared Inc. facility creditors will be increased to $1.2 billion.

If the auction results in a sale, these creditors will receive auction proceeds in lieu of some of the other plan consideration;

• Holders of pre-bankruptcy LP facility SPSO claims will receive a share of $1 billion in new terms loans and 100% of new common equity if they vote to accept the plan. If holders of pre-bankruptcy LP facility SPSO creditors vote to reject the plan, they will receive new tranche B term loans in an amount equal to their claim.

If the auction results in a sale, these creditors will receive auction proceeds in lieu of some of the other plan consideration;

• If holders of pre-bankruptcy LP facility claims vote to reject the plan, holders of pre-bankruptcy LP facility SPSO subordinated claims will receive a share of excess LP auction proceeds, provided that no distribution can exceed 100% of the claim amount;

• Holders of pre-bankruptcy LightSquared Inc. facility subordinated claims will receive a share of auction proceeds, provided that no distribution can exceed 100% of the claim amount;

• Holders of LP debtor general unsecured claims and LightSquared Inc. convenience claims will receive cash equal to the principal amount of their claims;

• Holders of LightSquared Inc. debtor general unsecured claims and holders of preferred interests will receive a share of any remaining excess auction proceeds, provided that no distribution can exceed 100% of the claim amount;

• Common stock interests will be cancelled, and holders will receive a share of any remaining excess auction proceeds;

• Holders of intercompany claims will receive no distribution, except any intercompany claim of SkyTerra (Canada) Inc. will be reinstated; and

• Intercompany interests other than existing LP debtor common equity interests will be reinstated.

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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