Philip Falcone’s bankrupt LightSquared Inc. won court permission to award bonuses to four key executives under a revised plan that pays them the most if the company sells its assets or exits bankruptcy before July.
U.S. Bankruptcy Judge Shelley Chapman in Manhattan today approved the amended plan after LightSquared resolved concerns raised by a group of lenders owning $1.1 billion in debt and the U.S. Trustee, an arm of the Justice Department that oversees bankruptcies.
“This program is very clearly incentive-based, with hurdles and benchmarks that are frankly not easy to accomplish,” Chapman said.
While the executives, including Chief Executive Officer Douglas Smith and Chief Financial Officer Marc Montagner, may be paid more under the new plan, it requires them to exit bankruptcy sooner and keep the company to a strict budget, Matthew Barr, a LightSquared lawyer, told Chapman today. Managers also have an incentive to meet three regulatory milestones by Dec. 31, 2013, Barr said.
Executives would receive different amounts based on how much cash they save, how soon they meet regulatory goals, and how soon the wireless-network company exits bankruptcy. Details of LightSquared’s regulatory goals were filed under seal.
Bonuses may reach 200 percent of base salary if the company exits bankruptcy by June 30. After that, bonus amounts decline, with managers getting nothing if the company doesn’t exit by Jan. 1, 2014.
The new bonus plan will omit planned grants of restricted stock units, and make payments in cash, the company said in court papers, without estimating a new total to be paid out. The old plan was estimated to pay a maximum of $6 million.
Separately, Chapman said she would enter orders later today for revised fees and expenses to be paid to LightSquared’s lawyers and consultants. After the U.S. Trustee earlier objected, professionals including main bankruptcy counsel Milbank, Tweed, Hadley & McCloy LLP agreed to new terms that will trim total costs in the case so far to $5.6 million from $5.7 million.
LightSquared, which is backed by Falcone’s Harbinger Capital Partners hedge fund, has been in dispute with the ad hoc lender group since the outset of its Chapter 11 case. The group includes Capital Research & Management Co., Appaloosa Management LP and Fortress Investment Group LLC.
LightSquared, based in Reston, Virginia, filed for bankruptcy in May, saying it had spent $4 billion developing a satellite system that it couldn’t implement because of lack of Federal Communication Commission approval. The FCC cited complaints from makers and users of global-positioning-system devices -- including the U.S. military and commercial airlines - - who said the signals would interfere with their navigation.
A status conference on the company’s dispute with the lender group over what documents must be produced in a probe of pre-bankruptcy loans was delayed to Nov. 5.
The lender group withdrew opposition to an extension of Falcone’s control earlier this month, as LightSquared won more time to file a bankruptcy plan after coming up with a new regulatory strategy. The terms give it until Jan. 31 to file a plan and until April 1 to win creditors’ acceptance.
LightSquared filed for bankruptcy listing assets of $4.48 billion and debt of $2.29 billion. Harbinger acquired LightSquared in March 2010 for $1.05 billion in cash and controls 96 percent of its stock.
The case is In re LightSquared Inc., 12-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).