LightSquared, a wireless broadband network company control by Philip Falcone, CEO of Harbinger Capital disclosed a $3.05 billion new restructuring plan including investments from private equity firms.
Details of LightSquared new restructuring plan
Under the new restructuring plan, LightSquared would receive $1.75 billion in new funding from private equity firms, Cerberus Capital Management LP and Fortress Investment Group LLC (NYSE:FIG) and JPMorgan Chase & Co. (NYSE:JPM), the largest bank in the United States.
The private equity firms and the bank would receive a combined 74% stake in LightSquared. Falcone will only retain 12.5% of the equity of the restructured company. The new restructuring plan was revealed by lawyers to Judge Shelley C. Chapman of the United States Bankruptcy Court in Manhattan, according to report from the Wall Street Journal.
In addition, LightSquared would raise $1.3 billion through the debt markets. The wireless broadband network company aims to receive approval for the new restructuring plan by the end of September, but is not yet finalized and submitted with the court.
LightSquared’s top secured lender would receive payment
Charlie Ergen, the chairman of DISH Network Corp (NASDAQ:DISH) and the top secured lender of LightSquared would receive a payment of $470 million in cash for his stake. He would also receive a $492 million in unsecured note. The actual amount or percentage he could recover from the unsecured note would be ascertained in a court trial along with other claims in the case.
Earlier this year, Judge Chapman ruled that Ergen violated the spirit of a credit agreement when he purchased LightSquared’s debt because DISH Network Corp (NASDAQ:DISH) is a competitor.
During a hearing earlier this year, Ergen explained that DISH Network Corp (NASDAQ:DISH) did not perceive the wireless spectrum assets of LightSquared as an attractive investment. Despite the perception of the satellite television service provider, he saw an opportunity for himself made the investment.
Ergen pointed out, “From an investment point of view, LightSquared still had valuable spectrum. While it might not fit necessarily with Dish, that spectrum could fit with different companies.”
A group of hedge funds that own a bank debt similar to Ergen would receive a full payment in cash. The group agreed to receive an amount slightly lower than the full value of the debt if the new restructuring plan of LightSquared would be approved by September 30.