Bloomberg News

LightSquared Lenderes Say It Can Use Cash on Their Terms

June 06, 2012

A group of LightSquared Inc.’s lenders said the company can use their cash collateral to operate in bankruptcy if it agrees to their terms, which include a budget and a 90-day limit.

The bankrupt maker of wireless broadband technology backed by Philip Falcone has been in dispute with the lenders since the outset of its Chapter 11 case. Lenders said in court papers filed yesterday in U.S. Bankruptcy Court in New York that they still object to the company’s use of their cash collateral, but will agree to it on certain terms.

If LightSquared rejects their terms, the company “may not use the LP Lenders’ cash collateral because the debtors have not and cannot satisfy their evidentiary burden of demonstrating that the LP Lenders’ interest in their cash collateral is adequately protected,” the group wrote.

The group of lenders, which owns $1.1 billion of the company’s secured debt at its “LP” unit, includes Capital Research & Management Co., Appaloosa Management LP and Fortress Investment Group LLC. The so-called ad-hoc group also demanded that any use of cash be classified as a debtor-in-possession loan, meaning that the group will then have a higher-priority to be repaid than other lenders.

Priority Liens

The priority liens would apply to all assets of the company’s LP unit, as well as LightSquared’s “Inc.” unit, which has borrowed $322.3 million from other lenders through agent U.S. Bank NA.

U.S. Bankruptcy Judge Shelley Chapman in May permitted the company to use $15 million of cash the company said didn’t have claims from its lenders, which LightSquared said should last it until the first week of July.

The lender group said in its proposed restrictions on cash use that without limits such as a budget, there is not enough evidence that the company won’t waste its assets, because LightSquared still needs approval from the Federal Communications Commission to move forward with its plan to offer wireless broadband and have a viable business.

Even if it gets that approval, the company will “still have to raise billions of dollars in financing, build out or lease a terrestrial network and then sign up enough customers (or embark on some other business plan, which would entail its own costs, risks and delay) before they could generate sufficient income,” the lenders said.

LightSquared filed for bankruptcy May 14, saying it will seek a resolution with U.S. regulators who thwarted the company’s plan to deliver high-speed wireless to as many as 260 million people over concerns that it interferes with GPS networks.

LightSquared, based in Reston, Virginia, listed assets of $4.48 billion and debt of $2.29 billion as of Feb. 29 in its Chapter 11 filing. The filing followed intense negotiations with creditors, who had requested that Falcone step aside.

The case is In re LightSquared Inc., 12-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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