LightSquared Inc. received approval from a New York bankruptcy judge on Tuesday to enter into a $1.75 billion exit financing arrangement that the wireless communications company said will power its reorganization plan after three years in Chapter 11.
U.S. Bankruptcy Judge Shelly Chapman gave LightSquared approval to enter into an engagement letter with Credit Suisse Securities (USA) LLC, Jefferies Finance LLC and Morgan Stanley Senior Funding Inc., which are the lead arrangers on the deal. The financing arrangement was not opposed by any of LightSquared's stakeholders, company attorneys told the judge during a hearing in Manhattan.
The deal is structured so that the fee LightSquared will end up paying the three lead arrangers will depend partially upon how much the working capital facility yields. LightSquared's fees will be reduced depending upon the cost of borrowing, a company attorney said.
Parties also negotiated an additional term that will give LightSquared's lenders the option until June 15, 2016, to offer up alternative financing arrangements that are more favorable to the company, Milbank Tweed Hadley & McCloy LLP attorney Karen Gartenberg told the court.
Gartenberg said the current deal represents the best possible financing currently available to LightSquared. The company currently has $220 million cash on hand, Milbank's Matthew Barr said at the hearing.
Approval of the exit financing arrangement comes after LightSquared in March finally secured court approval for its Chapter 11 plan after three years of intense confrontations with its creditors. In court briefs, LightSquared said the deal maximizes its potential value and is the best option for executing its restructuring plan as quickly as possible.
A hugely promising startup backed by hedge fund magnate Philip Falcone, LightSquared sank into Chapter 11 in 2012 when the Federal Communications Commission rejected its proposed nationwide wireless network over concerns about interference with global positioning technologies.
Since then, seven restructuring proposals have fizzled, one rejected by U.S. Bankruptcy Judge Shelley C. Chapman and six tentative agreements that never gained enough creditor support to advance as lawyers debated the ultimate value of LightSquared’s spectrum assets with a renewed licensing application still sitting before the FCC.
LightSquared is represented by Matthew S. Barr, Alan J. Stone, Michael L. Hirschfeld, Karen Gartenberg and Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP. LightSquared’s special committee is represented by James H.M. Sprayregen, Paul M. Basta and Joshua A. Sussberg of Kirkland & Ellis LLP.
The case is In re: LightSquared Inc., case number 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.
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