Editor Note: I will be writing a post on Ally / Rescap tomorrow, Tuesday the 15th after the Ally call. At the end of the day, the 3rd lien 9.625% went out 94-95, down 4-5 points. I will also be writing a post this week, in a new template, for Houghton Mifflin.
Today, LightSquared Inc. ("LightSquared" or "the Company") and 19 of its subsidiaries filed for bankruptcy in the Southern District of New York (12-12080). As most are aware, LightSquared is the spectrum play of Phil Falcone's Harbinger Capital, which recently represented a large portion of Harbinger's assets.
For those interested, the docket (via the claims agent site) can be found here: LightSquared Docket. The Term Loan went out 67-68.5 (flat) at the end of the day. The bank debt has rallied as of late on news reports that Charles Ergen, owner of DISH Network, had purchased a substantial amount of bank debt in the name.
Some interesting points of reference from the First Day Declaration of CFO Marc Montagner:
- From 2001 to today, LightSquared has invested approximately $4 billion of funds in its wireless network business plan (4G LTE open wireless broadband network)
- Significant discussion of working with GPS industry and the subsequent issues with interference (that has also widely been reported in the press): "As it had done in all previous situations, LightSquared offered to work with the various governmental agencies and the GPS industry to rectify these issues and to expend significant resources in aid thereof. Unlike all previous situations, however, the GPS industry refused to compromise with LightSquared and instead sought to convince regulatory agencies to strip LightSquared of its ability to use its allocated spectrum for terrestrial purposes"
- All parties, including LightSquared are awaiting an FCC decision, after a public comment period, for LightSquared's ability to use its spectrum for terrestrial purposes
- LightSquared has cut 1/2 of its employees and reduced burn by 30%
- Looks like there was an attempt at an out of court restructuring that went awry and LightSquared was forced to file Chapter 11
- Here is the corporate structure:
- LightSquared has deployed two of the most powerful mobile satellites ever constructed
- Three lines of business 1) MSAT: Mobile Satellite Communications or the wholesale service [push to talk included] 2) MDS: Mobile Data Services. "low rate data service offering primarily used for applications such as fleet and load management, email, vehicle tracking, two-way messaging and broadcast messaging and 3) PNC: Private Network Carrier. Leasing bandwidth for custom satellite data solutions.
- The play all along was that the proliferation of mobile would overwhelm the needs of current carrier's spectrums and LightSquared would save the day by providing their own 4G LTE network.
- $2.3B of liabilities as of the February 29th. Book value is listed at $4.48B
- Spectrum breakdown is given
- Capital Structure: LightSquared Inc Facility: $278.8M allegedly secured by a first-priority security interest in (a) the One Dot Six Lease, (b) the capital stock of each Prepetition Inc. Subsidiary Guarantor (i.e., One Dot Four Corp., One Dot Six Corp. and One Dot Six TVCC Corp.). This facility is owned by Harbinger and there is $322M outstanding as of the petitoin date. LightSquared LP Facility of $1.5B. Amounts outstanding under the Prepetition LP Credit Facility are allegedly secured by a first-priority security interest in (a) substantially all of the assets of LightSquared LP and the Prepetition LP Subsidiary Guarantors, (b) the equity interests of LightSquared LP and the Prepetition LP Parent Guarantors (except LightSquared Inc.), (c) the equity interests of the Prepetition LP Subsidiary Guarantors and (d) the rights of LightSquared Inc. under and arising out of the Inmarsat Cooperation Agreement. As of the petition date, $1.7B of this facility was outstanding.
- Appaloosa Management
- Capital Research
- Redwood Capital
"As the Debtors’ advisors will attest at the Interim Hearing, in these Chapter 11 Cases, the Prepetition Inc. Lenders are sufficiently protected by an equity cushion of 33% at the low end and 63% at the high end. As the Debtors’ advisors will further attest at the Interim Hearing, the Prepetition LP Lenders are also sufficiently protected by an equity cushion of 68% at the low end and 82% at the high end. Both equity cushions are significantly above the amount typically found satisfactory by courts in this and other districts."