LightSquared amended plan of reorganization effective as of Dec. 7

By Caroline Salls

Pittsburgh, Dec. 8 – LightSquared Inc.’s second amended joint plan of reorganization took effect on Monday, according to a notice filed with the U.S. Bankruptcy Court for the Southern District of New York.

The plan was confirmed on March 27, 2015.

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 Jefferies Finance LLC to provide $1.52 billion in five-year second-lien exit financing.

The exit financing was scheduled to 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.”

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.

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.

Creditor treatment

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.

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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