Ligado Networks LLC, the bankrupt satellite communications company, is seeking court approval for a Key Employee Incentive Program (KEIP) that could pay its six top executives at least $2.1 million for meeting cash conservation targets and recovering potentially more than $150 million in satellite insurance claims. The proposal, filed April 11 in Delaware bankruptcy court, aims to motivate senior leadership to improve the company's financial position while it works to complete a crucial transaction with AST & Science LLC involving its valuable wireless spectrum assets.
The proposed incentive plan features two components: one tied to limiting the company's cash burn during 2025, and another that would award executives 5% of any satellite insurance proceeds recovered from claims related to performance degradation of its SkyTerra-1 satellite. According to court documents, both Ad Hoc First Lien Group and Ad Hoc Crossholder Group creditors support the plan.
"Both components of the KEIP directly align the economic interests of key members of management with those of the Debtors' stakeholders; every dollar saved in reduced net cash burn or recovered as Satellite Insurance Proceeds will improve the stakeholders' recoveries by improving the financial position of the Debtors and reorganized Debtors," stated Douglas Smith, Ligado's President and CEO, in a declaration supporting the motion.
Ligado Networks, which filed for Chapter 11 bankruptcy protection on January 5, 2025, is pursuing a restructuring strategy centered on a transaction with AST & Science that would allow AST to use Ligado's L-Band spectrum for space-based broadband services. The company is also pursuing litigation against the U.S. Government, claiming government actions prevented it from fully utilizing its spectrum assets.
The first component of the incentive plan challenges executives to minimize "Pro Forma Net Cash Burn" during 2025, with payments tied to three performance tiers. At the "Target" level, the company would spend $83.17 million, triggering payments totaling $2.14 million to be divided among six executives. If spending falls to $70.69 million (15% below budget), maximum payouts would increase to $3.21 million total. Conversely, if spending rises to $87.33 million (5% above budget), executives would receive only half of their target bonuses.
"Without the KEIP, the KEIP Participants may lack appropriate incentives to implement the difficult cost-cutting measures required during the Chapter 11 Cases," Smith stated in his declaration. The proposed targets are more stringent than covenants in the company's debtor-in-possession financing, which permits significantly larger variances from budgeted amounts.
The second component of the incentive plan would award the executives 5% of "Net Insurance Proceeds" recovered from claims related to the SkyTerra-1 satellite. According to the filing, these unresolved insurance claims total over $150 million and involve negotiations with eighteen separate insurance underwriters. The net amount would be calculated by subtracting any restructuring professional fee overages from the gross insurance proceeds recovered.
"Prosecuting the SkyTerra-1 Loss insurance claims with the insurers requires significant efforts by and the specific expertise of the KEIP Participants," Smith noted in his declaration. "If successful, these efforts could yield significant additional value for the Debtors' estates."
To support the reasonableness of the proposed incentive plan, Ligado engaged FTI Consulting to benchmark the KEIP against similar programs in other bankruptcy cases. According to Gilbert Jones, Senior Managing Director at FTI, the Cash Burn Component's cost at the Target performance level ($2.139 million) falls below both the median of comparable KEIPs ($11.39 million) and the 25th percentile ($6.10 million).
The motion also emphasizes that the cost of the Cash Burn Component represents only 0.02% of the Debtors' approximately $9.1 billion in funded debt, compared to a median of 0.10% in comparable cases. Even factoring in both components, assuming $75 million in insurance recoveries, the total KEIP cost of $5.88 million would still fall below the median of comparable incentive plans.
Executives will only be eligible for payments if they remain employed through the end of the performance period, with limited exceptions for termination without cause or resignation for good reason. For the Cash Burn Component, the performance period runs from January 6 through December 31, 2025.
The filing highlights the specific responsibilities of each executive in achieving the KEIP goals. For the Cash Burn Component, these include implementing company-wide cost-cutting initiatives, analyzing and optimizing capital expenditures, managing partnerships to generate additional revenue, reducing network-related expenses, controlling legal and regulatory costs, and enhancing cash management practices.
For the Insurance Recovery Component, executives' tasks include overseeing insurance recovery strategy, developing financial analysis to substantiate claims, documenting performance degradation of the satellite, managing the legal strategy, and coordinating with the insurance broker on claim submissions.
The company argues that the KEIP meets the standards required under bankruptcy code sections 363(b) and 503(c)(3) as a reasonable exercise of business judgment and justified by the facts and circumstances of the case. The motion is scheduled for a hearing on May 7, 2025, with objections due by April 25, 2025.
Ligado Networks is represented by Richards, Layton & Finger, P.A. as Delaware counsel and Milbank LLP as co-counsel in its bankruptcy case, which is pending before Judge Thomas Horan in the United States Bankruptcy Court for the District of Delaware, Case No. 25-10006.
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