LightSquared, Failed Wireless Venture, Files Bankruptcy
LightSquared Inc. was granted permission to manage $15 million in cash in bankruptcy after saying it disagrees with lenders over the use of other assets to fund the two years needed to win regulatory approval and reorganize.
U.S. Bankruptcy Judge Shelley Chapman in Manhattan said yesterday she is prepared to approve LightSquared’s request to manage the only cash it has that lenders don’t have a claim to. The $15 million will last until the first week of July, by which time the wireless-network provider may reach an agreement with lenders to let it use their cash collateral to fund operations, said Matthew Barr, a lawyer for LightSquared.
“We did make good progress with some of the lenders,” Barr told Chapman, adding that he thought the lenders were asking for too much in exchange for use of the cash. Chapman encouraged the company to reach an agreement with lenders.
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.
Chapman yesterday approved routine requests for a company on its first day in bankruptcy, including the right to pay employees and continue its insurance policies.
LightSquared had offered in court papers to give protections to U.S. Bank NA as agent for lenders to its $278.8 million loan, on which $322.3 million is now outstanding. The loan, initially due July 1, is now due Dec. 31, and was taken by the company’s “Inc.” unit, according to court papers. LightSquared said it offered similar terms to UBS AG and Wilmington Trust FSB as agents to a $1.5 billion loan at its “LP” unit, on which $1.7 billion is now outstanding.
An ad-hoc group of lenders who own LP unit debt had objected in court papers, saying they needed more protection for the use of their cash. The group said it tried to reach an out-of-court agreement with the company and supports a “consensual resolution” in Chapter 11 as long as their rights are protected.
“Today it really isn’t a business. There’s a vision of a business,” Thomas Lauria, a lawyer for the ad-hoc group, said in court. Lenders are concerned that the company’s assets and cash flow aren’t enough to support the $1.7 billion in debt at its “LP” unit, he said.
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 the company’s backer, Philip Falcone, step aside. Falcone and the current management team will remain with the company, Terry Neal, a LightSquared spokesman, said May 14.
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