By Joseph Checkler
LightSquared said it wants to extend the incentive bonus package
for its top executives as the company eyes an end to its Chapter 11
case.
In a Tuesday filing with U.S. Bankruptcy Court in Manhattan,
LightSquared said it wants to alter the parts of the bonuses tied
to when the company emerges from bankruptcy and receives regulatory
approvals for its networks. The original $6 million proposal was
approved in October 2012, but the parts of the bonuses tied to
those events expired on Dec. 31.
With 2014 here, LightSquared wants to modify the plan so its top
four executives get cash bonuses of 75% of their salary if Judge
Shelley C. Chapman confirms a restructuring or approves a sale of
the company by Feb. 15. After that, those executives--Chief
Executive Doug Smith, Chief Financial Officer Marc Montagner,
General Counsel Curtis Lu and regulatory executive Jeffrey
Carlisle--would get nothing.
If regulatory approvals are achieved by the end of this year,
LightSquared wants the executives eligible for the bonuses, too.
The original package approved by Judge Chapman in late 2012 called
for a bonus of as much as two times the executives' salary if full
regulatory approval was received, with lower amounts for lower
levels of approvals.
Incentive bonuses are nearly always an issue in bankruptcy
cases, including LightSquared's. Judge Chapman's 2012 approval came
only after creditors and the federal bankruptcy watchdog argued
that the milestones tied to the bonuses were too easy to reach,
causing LightSquared to set more difficult goals. Top management
and executives aren't eligible for bonuses designed simply to keep
them at a company, while lower-level employees are.
The bonus proposals come as various restructuring plans for
LightSquared are being proposed. The company in another filing said
it officially is seeking approval for its $285 million bankruptcy
loan, saying that not getting the loan from private equity firm
Melody Capital Advisors LLC "would immediately and irreparably
harm" the company. The money is needed to pay leases and continue
administering its costly Chapter 11 case.
That loan is part of a reorganization plan for LightSquared's
"Inc." and "One Dot Six" businesses, which are the smaller of two
major sets of wireless spectrum the company owns. LightSquared
creditors Mast Capital Management and U.S. Bancorp (USB) wanted to
buy that spectrum, but LightSquared says its new proposal is
better.
In all, LightSquared's restructuring plans would provide up to
$4 billion in financing to get it out of bankruptcy. The larger
piece of that proposal is led by Fortress Investment Group LLC
(FIG).
Dish Network Corp. (DISH) still hopes to buy the bigger of the
two chunks of spectrum, and Judge Chapman will consider a
restructuring plan based on the Dish bid at a Jan. 9 hearing. On
Jan. 21, LightSquared will make the case for Judge Chapman on its
plans. The judge will then decide which is better. Phil Falcone and
his Harbinger Capital Partners hedge-fund firm own LightSquared's
equity, and for now are supporting the company's proposals.
LightSquared filed for bankruptcy protection in May 2012 after
federal regulators refused to clear the company's network plans,
which they said could interfere with global-positioning
systems.
The company's latest restructuring plan is backed by Fortress,
Melody, J.P. Morgan Chase & Co (JPM) and Harbinger. It includes
the $2.5 billion in so-called exit financing and a $250 million
loan earmarked for a reorganized LightSquared.
The proposal would pay secured lenders in full and give stakes
in the restructured LightSquared to its current shareholders.
However, the proposal is contingent on securing various approvals
from the Federal Communications Commission, which regulates the
spectrum LightSquared is counting on to launch its wireless
broadband network. Dish's bid doesn't need those extra FCC
approvals.
Adding to the contentiousness is LightSquared's lawsuit against
Dish and its chairman, Charlie Ergen, who personally bought much of
LightSquared's bank debt before the Dish entity made its bid for
LightSquared's spectrum. LightSquared has said Mr. Ergen illegally
bought that debt on behalf of Dish, a competitor that wouldn't have
been allowed to buy it. Mr. Ergen and Dish are fighting the suit,
saying those allegations are false.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@wsj.com
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