Bankrupt satellite communications company Ligado Networks LLC is seeking court approval for an additional $547 million in debtor-in-possession financing commitments to backstop a crucial spectrum rights transaction that the company describes as central to its restructuring efforts.
In a motion filed on July 24 with the U.S. Bankruptcy Court for the District of Delaware, Ligado asked the court to approve an amendment to its existing DIP credit agreement that would provide the company with backstop funding commitments specifically designed to satisfy conditions of its deal with AST, a strategic partner seeking to use Ligado's valuable L-Band spectrum for space-based broadband services.
"Failure by the Debtors to satisfy the conditions to consummation of the AST Transaction would be catastrophic to the Debtors' restructuring process and could force these cases into an unwarranted chapter 7 liquidation," Ligado warned in its court filing.
The backstop financing is required under a framework agreement with AST to ensure that AST could be refunded any payments it advances to Ligado for satisfying cure amounts related to spectrum rights in the event of what the companies term an "Approval Condition Failure." The arrangement is essential to finalizing the AST deal that received court approval on June 23.
According to the motion, the same lenders who provided Ligado's original DIP facility would supply the incremental commitments. The financing comes with significant costs, including a 20% upfront fee payable in kind, a 5% original issue discount on funded loans, and an 8.75% per annum unused commitment fee.
In an unusual arrangement, the motion seeks approval of a letter agreement giving AST a power of attorney to submit a draw request under the DIP facility if Ligado fails to do so when required, ensuring AST can secure its refund directly if necessary.
"The Debtors and the DIP Lenders negotiated the DIP Amendment in good faith, at arm's-length, and with the assistance of their respective advisors," stated Bruce Mendelsohn, a partner at Perella Weinberg Partners L.P., in a declaration supporting the motion.
The financing also includes a "roll-up" feature where for each $2.00 of backstop commitments provided, $1.00 of pre-bankruptcy first lien secured debt would convert to roll-up loans under the DIP facility, effectively improving those lenders' position in the bankruptcy case.
Ligado filed for Chapter 11 protection on January 5, 2025, listing the affected debtors as Ligado Networks LLC and ten affiliated entities. The company has been operating with an approximately $940 million DIP facility approved by the court in February.
The AST transaction appears to be the linchpin of Ligado's restructuring strategy. Court documents indicate the deal will provide Ligado with warrants, convertible notes, and/or cash, plus quarterly payments designed to cover costs of maintaining spectrum rights, and a percentage of revenues derived from AST's use of the spectrum.
A hearing on the DIP amendment motion is scheduled for August 7, with objections due by July 31.
Richards, Layton & Finger, P.A. and Milbank LLP are serving as co-counsel to the debtors.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 14 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.