LightSquared lender SPSO objects to ‘confusing’ disclosure statement

By Kali Hays

New York, Jan. 13 – LightSquared Inc. creditor SP Special Opportunities, LLC (SPSO) objected to the disclosure statement related to the company’s proposed joint plan of reorganization, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, LightSquared filed the disclosure statement Dec. 18 after reaching a deal with equityholder Harbinger Capital Partners, LLC.

SPSO was not in full agreement with the plan as its claim will be treated as a second-lien claim, and LightSquared said that “SPSO’s pattern of conduct throughout the Chapter 11 cases suggests that it would not be supportive of any proposal that did not result in SPSO obtaining ownership and control of the debtors’ assets.”

In its objection to the disclosure statement, SPSO said that “a number of aspects of the plan are either confusing or inaccurately described” and claimed that “approval of the disclosure statement without revision would severely prejudice the rights of any party that did not negotiate or help draft the plan.”

Specifically, SPSO objected to the valuation analysis included in the plan, a $200 million “new investor” break-up fee and the terms of the new LP debtor-in-possession facility.

SPSO said that the disclosure statement is ambiguous as to whether or not LightSquared based the valuation on “potential license modifications” from the FCC and other regulatory authorities and that conditions surrounding the payment of the break-up fee are not adequately described in the disclosure statement, according to the objection.

As the LP debtor’s largest DIP lender and LightSquared’s largest secured lender, SPSO said it has yet to be approached about an extension of the LP facility set to mature Jan. 30 or regarding the possibility of replacement first-lien debt, although the disclosure statement calls for the infusion of new capital to repay in full allowed DIP claims.

SPSO said that “neither the plan nor the disclosure statement contains an adequate description of any refinancing of the LP facility” and that “the plan merely provides that the LP facility must be refinanced prior to, on, or as soon as practicable after the confirmation date.”

“The disclosure statement should not be approved unless it reveals a source of financing through the effective date and the debtors share publicly the commitments they have received from any parties that the debtors expect to provide financing,” the objection stated.

A hearing to approve the disclosure statement is scheduled for Jan. 15.

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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