LightSquared has long maintained that its success as a business depends on FCC approval of its proposed wireless spectrum use, though the latest version of the company’s reorganization plan removes an earlier requirement that the company receive FCC approval before it can exit Chapter 11. “The DIP facility, like the unconfirmable plan, reflects the obvious motive of the DIP lenders: protect themselves from the massive risks attendant to being a stakeholder of a company whose assets nobody wants, and that has made no demonstrable progress in obtaining the FCC relief on which its future purportedly hinges,” lawyers for SPSO wrote in their March 12 objection. Although the plan purports to repay SPSO in full, LightSquared is attempting to subordinate SPSO’s claims and repay the fund via a seven-year paid-in-kind note – treatment that SPSO has said is unacceptable. SPSO, the special purpose vehicle set up by Dish Networks founder Charles Ergen to purchase about $1 billion of LightSquared’s senior debt, is the only major creditor to have voted against LightSquared’s current reorganization plan (see “ LightSquared creditors all vote in favor of plan, except for Ergen,” LCD News, March 7, 2014). About $930 million of the new DIP would be converted into second-lien exit financing, $300 million into a loan for reorganized LightSquared Inc., and about $115 million into new equity. and $33.7 million on the recently approved new DIP for LightSquared LP (see “ LightSquared may tap new $33M DIP from senior lenders, Ergen,” LCD News, Feb.
The new DIP, arranged by joint bookrunners JP Morgan and Credit Suisse, would pay off claims on the company’s two outstanding DIPs, a $72.36 million DIP for LightSquared Inc. LightSquared is seeking bankruptcy court approval of a new $1.65 billion DIP facility, priced at L+1,100, with a 1% LIBOR floor, as part of its latest proposed reorganization plan. LightSquared’s latest proposed debtor-in-possession credit facility constitutes a sub rosa plan, “conceived in bad faith” as a way to force through a reorganization plan that discriminates against the company’s largest secured lender, SP Special Opportunities, according to an objection filed late Wednesday by SPSO.
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