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LightSquared splits $3 billion exit financing

By Billy Cheung

NEW YORK (Reuters) - Wireless broadband communications company LightSquared Inc is splitting its proposed $3 billion senior secured exit term loan into a $2 billion first-lien loan and $1 billion second-lien tranche, sources told Thomson Reuters LPC. The loan originally consisted of a single tranche.

Proceeds are to fund the company's emergence from bankruptcy. Jefferies is arranging the first lien portion. Lender commitments are due at 4 p.m. July 9.

The now $2 billion first-lien portion will offer coupons payable in cash and in kind.

As reported, price guidance on the four-year first-lien tranche is set at LIB+650 with a 1.5 percent Libor floor. Pricing now includes an additional 3 percent payable-in-kind coupon, bringing the total coupon to 11 percent, said sources. The loan is offered at a discount price of 98.5, as proposed at launch.

Lenders will receive upfront warrants, immediately vested, for 10 percent of fully diluted ownership. The company had previously offered warrants amounting to 5 percent of fully diluted ownership.

Jefferies declined to comment on the transaction.

The loan contains the following ticking fees until creditors fully fund the loan: 0 percent of the spread for the first 30 days, then 50 percent of the spread for the next 60 days and 100 percent of the spread thereafter.

If LightSquared fails to secure regulatory approval on certain disputed network spectrum, lenders would not fund the exit loans.

After receiving complaints from numerous users of global positioning systems regarding potentially disruptive interference from LightSquared's network transmissions, the Federal Communications Commission (FCC) in February 2012 tentatively suspended the company's attempts to build the land-based portion of its wireless network.

The company entered Chapter 11 to create breathing room to address the FCC's concerns

Harbinger Capital Partners, which owns 96 percent of LightSquared, is handling syndication of the $1 billion second-lien loan.

Although pricing guidance and terms are not yet available on the Harbinger-led loan, the interest payments on that debt would be entirely pay-in-kind, according to an investor.

The combined $3 billion of first and second lien loans would retire the pre-bankruptcy loans at LightSquared LP, the company's main operating subsidiary; loans and preferred equity at LightSquared's holding company; and the company's debtor-in-possession loan.

At a June court hearing, the company stated that this financing represents "the cornerstore of a Chapter 11 plan" that has yet to be filed.

LightSquared's exclusive deadline to put forth a restructuring plan expires on July 15.

LightSquared filed for Chapter 11 protection last May and is testing a proposal to swap some of its suspended spectrum with that currently used by the National Oceanic and Atmospheric Administration (NOAA).

While the results of this proposal are not yet known, LightSquared LP creditors, including billionaire Charlie Ergen who is chairman of U.S. satellite company Dish Network, seek to enforce this exclusivity period. Without a third extension of this key deadline, creditors can propose their own restructuring plan.

Failure to raise exit financing to repay creditors such as Ergen, whose investment affiliates own close to 50 percent of LightSquared LP loans, in full could increase this possibility of a competing plan, sources said.

Ergen has publicly expressed his desire to acquire additional spectrum and lost out to Sprint last month in a contested bid for Clearwire.

LightSquared declined to comment.

(Additional reporting by Leela Parker and Natalie Wright of Thomson Reuters LPC.)

(Editing By Jon Methven)

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