LightSquared Lenders Want Strict Leash on Company's Cash Use
06/06/2012| 02:52pm US/Eastern
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By Joseph Checkler
A group of LightSquared's senior lenders concerned about the wireless satellite company burning through its cash are proposing to extend the company a 90-day lifeline in exchange for liens on the company's assets, a strict monthly budget and other conditions.
In a Tuesday filing with U.S. Bankruptcy Court in Manhattan, the senior lenders owed $1.7 billion said that if LightSquared wants to use the cash that secures their loans, the company should only be allowed to do so for 90 days, after which progress in the case can be assessed.
LightSquared's stated goal of building a wireless broadband network that could provide satellite cell phone service to 260 million Americans by the end of 2015 got thrown into disarray when the Federal Communications Commission said the network would interfere with global-positioning systems. The company, controlled by hedge-fund manager Phil Falcone, was already struggling with its debt load and was forced to file for bankruptcy last month.
"It is undisputed that the Debtors need FCC approval to move forward with their business plan, and the Debtors cannot predict, or even speculate, as to when, if ever, they will obtain such approval," lawyers for the lenders said in a filing objecting to LightSquared's request to use the cash collateral securing the loans.
A hearing on the matter is set for June 10 in front of Judge Shelley C. Chapman. A LightSquared spokesman declined to comment for this story.
In order to gain their support, the lenders said LightSquared should be forced to propose a strict monthly budget of how the cash would be used, give the lenders liens on LightSquared's assets, pay the legal fees of the lenders and report weekly how much cash it's using. In addition, the lenders want the ability to ask the bankruptcy court to investigate whether it can pursue claims against Falcone and his hedge-fund firm, Harbinger Capital Partners.
At the company's first bankruptcy hearing on May 15, White & Case's Thomas E. Lauria, a lawyer for the lenders, said the FCC issues could take "years to resolve" and that he was concerned the company could burn through its then-nearly $200 million in cash during that time.
Falcone and Harbinger own most of LightSquared's stock, having invested billions of dollars into a venture that sought to compete with communications heavyweights such as AT&T Inc. (T) and Verizon Wireless. But efforts to build a national network stalled as the FCC began to raise its issues.
The company plans to use the breathing room of Chapter 11 to resolve these regulatory issues, address its more than $2 billion debt load and raise new capital to build out its network.
Earlier this week, Judge Chapman ruled that investors could be forced to sell down their LightSquared debt if they build too high a position, which the company said will help it preserve valuable tax benefits for its estate. Lawyers for the lenders, including Mr. Lauria, argued they don't want to be handcuffed into holding securities that could dwindle in value, and that a change in control--which would erase the tax gains--was an unlikely scenario.
The lender group includes Appaloosa Management LP, Fortress Investment Group LLC (>> Fortress Investment Group LLC) and Silver Point Capital LP.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
-Jacqueline Palank in Washington contributed to this article
Write to Joseph Checkler at joseph.checkler@dowjones.com. Follow him on Twitter at @JoeCheckler
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