Related Documents:
Declaration of Douglas Smith CEO
Motion to Approve DIP
Ligado Networks‘ prearranged chapter 11 in the Delaware Bankruptcy Court will take place parallel to the estate’s pursuit of its 2023 lawsuit against the U.S. Government for what the declaration of CEO Douglas Smith calls the “government’s unlawful taking of Ligado’s licensed L-Band spectrum.”
The chapter 11 filing is supported by 88% of Ligado’s prepetition funded creditors and aims to restructure approximately $7.8bn of prepetition debt into preferred equity, while maintaining existing preferred and common equity interests. The company’s restructuring support agreement outlines a significant reduction of total debt from $8.6bn to $1.2bn upon emergence from bankruptcy.
Ligado Networks is a mobile communications company that operates a satellite network across North America that has been providing mobile satellite services (MSS) to government and commercial customers for over 25 years, according to court documents.
The RSA creditors have agreed to fully backstop a DIP financing commitment of $442mn in new money to fund Ligado’s restructuring process. Additionally, the debtor’s financing documents provide for a roll-up of first-lien debt obligations in the aggregate principal amount of $442mn to $497mn. The DIP facility will convert to an exit facility upon emergence from bankruptcy, according to the RSA.
Ligado CEO Douglas Smith stated in his declaration that the U.S. government’s actions in acquiring L-Band spectrum have hindered the company’s ability to fully utilize its L-Band license, resulting in substantial financial losses and revenue uncertainties. These challenges have impeded Ligado’s capacity to generate sufficient cash flow to cover operational and capital expenses, according to Smith’s declaration.
The company’s restructuring strategy also hinges on its cooperation agreement with satellite service provider Inmarsat, designed to optimize the use of contiguous spectrum blocks within the L-band.
Furthermore, Ligado has secured a pivotal commercial agreement with AST SpaceMobile Inc., a competitor of Elon Musk’s Starlink. This agreement involves AST SpaceMobile providing Ligado with $113mn in warrants and usage rights payments, in exchange for access to Ligado’s L-Band spectrum. Through this collaboration, AST SpaceMobile will leverage Ligado’s mobile satellite services spectrum on its advanced low earth orbit satellite network, potentially accelerating consumer access to space-based broadband services, according to the debtor’s first-day filings.
The first-day hearing is scheduled for Jan. 7 at 14:00 ET before Judge Thomas Horan of the Delaware Bankruptcy Court.
The company’s first-day filings did not specify whether any monetary damages potentially recovered from its 2023 lawsuit against the Department of Defense, the Department of Commerce and the National Telecommunications and Information Administration (NTIA) would be distributed to prepetition creditors. The litigation is ongoing, with the government’s motion to dismiss recently denied.
Prepetition Capital Structure
Restructuring Support Agreement
- The RSA has the support of 88% of the debtor’s $8.7bn in prepetition funded debt.
- The RSA provides for a DIP facility consisting of $442mn in new-money multiple draw term loans and the roll-up prepetition debt. The full DIP facility will convert into an exit facility upon emergence.
- The RSA provides for the conversion of prepetition first-lien facilities into preferred equity through a waterfall system.
- Equity distribution waterfall:
- First-out term loans will be repaid in full in cash.
- New Series A-1 preferred units will be held by first-loan noteholders (that are not rolled up into the DIP).
- New series A-2 preferred units will be held by 1.5-lien claimants.
- New series A-3 preferred units will be held by second-lien noteholders.
- New series B-1 preferred units will be held by existing series A-1 preferred units.
- New series B-2 preferred units will be held by existing series A-2 preferred units.
- New series C preferred units will be held by existing series B units.
- New series D preferred units will be held by existing series C units.
- Existing common units will be preserved.
Debtor-in-Possession Financing
- The DIP new-money loans will be available in multiple draws in an aggregate principal amount of up to $442mn.
- The company will have access to $12mn in new-money funding upon entry of the interim order.
- Interest will be payable on the unpaid principal amount of all outstanding DIP loans at a rate per annum equal to 17.5%, payable in kind (or 15.5% per annum to the extent a cash interest election is made).
- The facility will also include the roll-up of first-lien debt obligations between $442mn and $497mn.
- The facility term is 120 days after the petition date.
Jennifer Lappe, JD
jennifer.lappe@levfininsights.com
+1 212 882 3386
