UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
)
In re: ) Chapter 11
)
LIGHTSQUARED INC., et al., ) Bankr. Case No. 12-12080 (SCC)
)
Debtors. ) Jointly Administered
)
)
SANJIV AHUJA,
Appellant,
)
)
)
)
-against-
LIGHTSQUARED INC., et al.,
)
)
)
Case No. 1:15-cv-02342 (KBF)
)
Appellees. )
)
LIGHTSQUARED’S OPPOSITION TO
APPELLANT SANJIV AHUJA’S MOTION FOR STAY PENDING APPEAL
MILBANK, TWEED, HADLEY & MCCLOY LLP
Matthew S. Barr
Alan J. Stone
Michael L. Hirschfeld
Andrew M. Leblanc
28 Liberty Street
New York, NY 10005-1413
Phone: (212) 530-5000
Fax: (212) 530-5219
Attorneys for Debtors and Debtors in Possession
Case 1:15-cv-02342-KBF Document 40 Filed 07/23/15 Page 1 of 28
TABLE OF CONTENTS
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Page
PRELIMINARY STATEMENT .................................................................................................... 1
LEGAL STANDARD ..................................................................................................................... 3
ARGUMENT .................................................................................................................................. 5
I. Ahuja Has Not Satisfied the Legal Standard for a Stay ...................................................... 5
A. Factors 1 and 2: Ahuja Will Not Suffer Irreparable Harm and His
Appellate Arguments Are Devoid of Merit ............................................................ 5
B. Factor 3: The Potential Harm to LightSquared and Its Stakeholders
Independently Necessitates Denial of a Stay ........................................................ 10
1. Daily Accretions of Interest and Preferred Dividends Would Cause
LightSquared to Incur Millions of Dollars in Additional Expenses ......... 11
2. The Commitment Fee for the Working Capital Facility Will
Increase by as much as $30 Million with the Passage of Time ................ 15
3. LightSquared Could Be Compelled to Make a $50 Million
“Adequate Protection” Payment to Its Prepetition Lenders ...................... 16
4. The Inability to Close Before Expiration of the Working Capital
Facility Commitment on December 15, 2015 Could Cause the
Reorganization to Fail ............................................................................... 17
C. Factor 4: The Public Interest Favors LightSquared’s Emergence from
Bankruptcy ............................................................................................................ 20
II. Any Stay Must be Conditioned on a Bond Sufficient to Protect Lightsquared and its
Stakeholders from all Injury Flowing from the Stay ........................................................ 21
CONCLUSION ............................................................................................................................. 24
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TABLE OF AUTHORITIES
Page(s)
CASES
ACC Bondholder Grp. v. Adelphia Commc’ns Corp. (In re Adelphia Commc’ns Corp.),
361 B.R. 337 (S.D.N.Y. 2007) ......................................................................................... passim
Aetna Cas. & Sur. Co. v. LTV Steel Co. (In re Chateaugay Corp.),
94 F.3d 772 (2d Cir. 1996).........................................................................................................5
Babitt v. Vebeliunas (In re Vebeliunas),
No. 01 Civ. 1108, 2002 U.S. Dist. LEXIS 6142 (S.D.N.Y. Apr. 8, 2002) ................................3
Beeman v. BGI Creditors’ Liquidating Trust (In re BGI, Inc.),
772 F.3d 102 (2d Cir. 2014).......................................................................................................5
Beeman v. BGI Creditors’ Liquidation Trust (In re BGI, Inc.),
504 B.R. 754 (S.D.N.Y. 2014) ......................................................................................... passim
Beogradska Banka A.D. v. Superintendent of Banks (In re Agency for Deposit Ins.,
Rehab., Bankr. and Liquidation of Banks),
No. 03-9320, 2004 U.S. Dist. LEXIS 3407 (S.D.N.Y. Mar. 4, 2004) .......................................8
Hirschfeld v. Bd. of Elections,
984 F.2d 35 (2d Cir. 1993).........................................................................................................3
In re Adelphia Commc'ns Corp.,
368 B.R. 140 (Bankr. S.D.N.Y. 2007) .....................................................................................21
In re Baker,
No. 05-3487, 2005 U.S. Dist. LEXIS 36969 (E.D.N.Y. Aug. 31, 2005)...................................6
In re Bd. of Dirs. of Multicanal S.A.,
No. 04-10280, 2005 Bankr. LEXIS 1865 (Bankr. S.D.N.Y. Jan. 6, 2005) ................................6
In re Calpine Corp.,
No. 05-60200 (BRL), 2008 Bankr. LEXIS 217 (Bankr. S.D.N.Y. Jan. 24, 2008) ..6, 13, 18, 22
In re Country Squire Assocs. of Carle Place, L.P.,
203 B.R. 182 (B.A.P. 2d Cir. 1996) .......................................................................................8, 9
In re N.Y. Skyline, Inc. v. Empire State Bldg. Co. (In re N.Y. Skyline, Inc.),
520 B.R. 1 (S.D.N.Y. 2014) .............................................................................................3, 4, 10
Laroe Estates, Inc. v. TD Bank, N.A. (In re 473 W. End Realty Corp.),
No. 14 CV 2321, 2014 U.S. Dist. LEXIS 77036 (S.D.N.Y. May 12, 2014) .............................6
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Lutin v. United States Bankr. Court (In re Advanced Mining Sys.),
173 B.R. 467 (S.D.N.Y. 1994) ...................................................................................................9
Official Comm. of Unsecured Creditors v. PSS Steamship Co. (In re Prudential Lines
Inc.),
928 F.2d 565, 573 (2d Cir. 1991).............................................................................................20
Orange Cnty. Water Dist. v. Unocal Corp.,
584 F.3d 43 (2d Cir. 2009).........................................................................................................9
Rally Auto Grp., Inc. v. Gen. Motors LLC (In re Motors Liquidation Co.),
No. M-47, 2010 U.S. Dist. LEXIS 118166 (S.D.N.Y. Oct. 29, 2010) ......................................4
S.E.C. v. Daspin,
557 F. App’x 46 (2d Cir. Feb. 5, 2014) .....................................................................................7
Sprint Nextel Corp. v. DBSD N. Am. Inc. (In re DBSD N. Am., Inc.),
No. 09 Civ. 10156, 2010 U.S. Dist. LEXIS 44996 (S.D.N.Y. May 7, 2010) .................. passim
Texaco Inc. v. Pennzoil Co.,
784 F.2d 1133 (2d Cir. 1986), rev’d on other grounds, 481 U.S. 1 (1987) ...............................8
Triple Net Invs. IX, LP v. DJK Residential, LLC (In re DJK Residential, LLC),
No. 08-10375 (JMP), 2008 U.S. Dist. LEXIS 19801 (S.D.N.Y. Mar. 7, 2008) .............. passim
STATUTES
11 U.S.C. § 363 ........................................................................................................................................ 10
11 U.S.C. § 1101 ..............................................................................................................................5
OTHER AUTHORITIES
Fed. R. Bankr. P. 8007 .................................................................................................................3, 4
Fed. R. Bankr. P. 8025 .............................................................................................................1, 3, 4
FCC, Connecting America: The National Broadband Plan, at xii, 75, 87-88, available at
https://www.fcc.gov/national-broadband-plan. .......................................................................21
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LightSquared Inc. (“L2Inc”), LightSquared LP (“L2LP”), and certain affiliates
(collectively, “LightSquared”), as debtors and debtors in possession in the above-captioned
chapter 11 cases and Appellees in this appeal, submit this opposition to the motion of Sanjiv
Ahuja (“Ahuja”) for an order (i) staying the Bankruptcy Court’s Order Confirming Modified
Second Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code (“Confirmation Order”)
pending this Court’s decision in this appeal, and (ii) if this Court affirms, staying both this
Court’s judgment and the Confirmation Order pending Ahuja’s appeal to the Second Circuit.1
PRELIMINARY STATEMENT
LightSquared stands at the threshold of emerging from chapter 11 after more than
three years in bankruptcy. One of the last remaining hurdles is a Federal Communications
Commission (“FCC”) proceeding to consider approval of transactions under the Modified
Second Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code (“Plan”) that will result
in a change of control of LightSquared’s FCC licenses (the “Change of Control Application”).
The public comment period in that proceeding closed on July 20, 2015 without any comments
filed in opposition.2 A customary national security, public safety and law enforcement review by
the Department of Justice is ongoing. Upon completion of that review, the FCC will be able to
rule on LightSquared’s application and clear the way for LightSquared to emerge from chapter
11.
Ahuja—holder of L2Inc common equity at the absolute bottom of the capital
structure and the sole objector to an otherwise fully consensual Plan3—asks the Court to keep
1 Under Rule 8025(c) of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”), a stay
of this Court’s judgment automatically would stay the Confirmation Order as well.
2 See Declaration of James W. Burke Ex. A (FCC Public Notice); id. Ex. B (trade article).
3 SP Special Opportunities, LLC has objected to certain injunctive provisions of the Confirmation
Order, but otherwise fully supports the Plan and does not seek to delay its implementation.
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LightSquared shuttered in bankruptcy indefinitely, imperiling the Plan recoveries of every other
stakeholder, while he continues to pursue his failed objections on this appeal and a threatened
further appeal to the Second Circuit. And he asks the Court to allow him to do all this without
posting a bond. The Court should deny the requested stay pending appeal, as Ahuja’s motion
fails to satisfy any of the four criteria for a stay.
First, Ahuja has not shown irreparable injury. His only claimed harm is that if
the Plan is substantially consummated, LightSquared will argue that his appeal has been
rendered equitably moot—an argument that Ahuja asserts in his motion would not be correct.
As a matter of law, this does not constitute irreparable harm that can support a stay. Second,
Ahuja has not shown any likelihood of success on the merits. As set forth in LightSquared’s
appellate brief and reinforced during oral argument, Ahuja has misrepresented the Bankruptcy
Court’s valuation finding, utterly ignoring the concerns consistently voiced by the Bankruptcy
Court since 2013 about the lack of regulatory approval for terrestrial operations; misread
controlling Supreme Court precedent; mistakenly sought to invoke the “new value” doctrine in
circumstances to which it does not apply; and naïvely and erroneously asked this Court to
assume that the billions in new financing, most of it from third parties, and the extensive
concessions and compromises by other creditors (holding more than $2 billion in claims that will
not be paid in cash) that will allow LightSquared to emerge from bankruptcy would remain in
place for Ahuja’s benefit, while he offers nothing in return. Third, a stay will impose tens of
millions of dollars of additional financial obligations upon LightSquared. Worse still, if the stay
were to continue into December 2015, LightSquared would be confronted with the loss of its
multi-billion dollar exit financing, causing the entire reorganization to implode by erasing the
Plan and the billions in creditor recoveries provided thereunder. Fourth, the public interest
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favors LightSquared’s proceeding expeditiously with the consummation of its Plan, which is
supported by all of LightSquared’s other stakeholders, and which advances the interests
articulated in the FCC’s “National Broadband Plan.”
Ahuja’s request for a stay pending appeal should be denied. And if the Court
determines, nevertheless, to grant a stay, the Court should require Ahuja to post a substantial
bond to protect LightSquared from the harm it will suffer.
LEGAL STANDARD
“A stay of a judgment pending an appeal is an exercise of judicial discretion and
is not a matter of right.” In re N.Y. Skyline, Inc. v. Empire State Bldg. Co. (In re N.Y. Skyline,
Inc.), 520 B.R. 1, 5 (S.D.N.Y. 2014) (Scheindlin, J.). In determining whether to grant a stay
pursuant to either Bankruptcy Rule 8007(b) or Bankruptcy Rule 8025(b), district courts apply
substantially the same four-factor test that circuit courts use to evaluate requests for a stay
pending appeal from a district court order and that trial courts use to evaluate requests for
injunctive relief. Courts thus consider: (1) whether the movant would suffer irreparable injury if
a stay were denied; (2) whether the movant has at least a substantial possibility of success on the
merits of its appeal; (3) whether other parties would suffer a substantial injury if the stay were
granted; and (4) whether the public interest favors a stay. See, e.g., N.Y. Skyline, 520 B.R. at 4-5
(denying stay); Beeman v. BGI Creditors’ Liquidation Trust (In re BGI, Inc.), 504 B.R. 754, 762
(S.D.N.Y. 2014) (Scheindlin, J.) (same).4 Each of the factors must weigh in favor of a stay,
4 See also Sprint Nextel Corp. v. DBSD N. Am. Inc. (In re DBSD N. Am., Inc.), No. 09 Civ. 10156,
2010 U.S. Dist. LEXIS 44996, at *6 (S.D.N.Y. May 7, 2010) (Kaplan, J.) (denying stay); Rally Auto
Grp., Inc. v. Gen. Motors LLC (In re Motors Liquidation Co.), No. M-47, 2010 U.S. Dist. LEXIS 118166,
at *7 (S.D.N.Y. Oct. 29, 2010) (Patterson, J.) (same); Triple Net Invs. IX, LP v. DJK Residential, LLC (In
re DJK Residential, LLC), No. 08-10375 (JMP), 2008 U.S. Dist. LEXIS 19801, at *6 (S.D.N.Y. Mar. 7,
2008) (Lynch, J.) (citing Hirschfeld v. Bd. of Elections, 984 F.2d 35, 39 (2d Cir. 1993)) (same); Babitt v.
Vebeliunas (In re Vebeliunas), No. 01 Civ. 1108, 2002 U.S. Dist. LEXIS 6142, at *4 (S.D.N.Y. Apr. 8,
2002) (Preska, J.) (same). Several of the cases cited herein were decided under former Bankruptcy Rules
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although the strength of the movant’s showing that is required with respect to any one of the
factors may be greater or lesser depending upon the movant’s showing with respect to the others;
the movant bears the ultimate burden of establishing that, on balance, a stay is warranted. See
N.Y. Skyline, 520 B.R. at 4 n. 5, 5.5
Even if the movant meets its burden, moreover, the Court may (and in this case
most certainly should) condition issuance of a stay on the movant posting a bond. Fed. R. Bankr.
P. 8007(c), 8025(b)(4). The default rule is that “the court should set a bond at or near the full
amount of the potential harm to the non-moving parties.” ACC Bondholder Grp. v. Adelphia
Commc’ns Corp. (In re Adelphia Commc’ns Corp.), 361 B.R. 337, 351 (S.D.N.Y. 2007)
(Scheindlin, J.). “[I]f the movant seeks the imposition of a stay without a bond, the applicant has
the burden of demonstrating why the court should deviate from the ordinary full security
requirement.” Triple Net Invs. IX, LP v. DJK Residential, LLC (In re DJK Residential, LLC),
No. 08-10375 (JMP), 2008 U.S. Dist. LEXIS 19801, at *6 (S.D.N.Y. Mar. 7, 2008) (Lynch, J.)
(quotation omitted).
8005 and 8017. Bankruptcy Rules 8007 and 8025, which became effective in December 2014, are
derived from former Bankruptcy Rules 8005 and 8017. Fed. R. Bankr. P. 8007, 8025, committee notes.
5 The Bankruptcy Court below already denied Ahuja’s request for a stay pending appeal to this
Court. With respect to his request for a stay pending resolution of the current appeal, therefore, Ahuja has
“to convince the district court . . . that the bankruptcy judge was incorrect.” BGI, 504 B.R. at 761-62
(quoting 10 Collier on Bankruptcy ¶ 8005.11 (16th ed. 2013)). Although Ahuja asserts that the
Bankruptcy Court denied his motion for stay without explanation, it is clear from the transcript of the
proceedings that the Bankruptcy Court concluded, at a minimum, that Ahuja’s impending appeal had no
possibility of success on the merits.
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ARGUMENT
I. AHUJA HAS NOT SATISFIED THE LEGAL STANDARD FOR A STAY
A. Factors 1 and 2: Ahuja Will Not Suffer Irreparable Harm and His Appellate
Arguments Are Devoid of Merit
“A showing of irreparable harm is the principal prerequisite for the issuance of a
stay.” Adelphia, 361 B.R. at 347 (quotation omitted). The only potential harm Ahuja identifies
is the possibility that his appeal will be dismissed under the doctrine of “equitable mootness”—a
“prudential doctrine” specific to bankruptcy law under which appellate courts “balance the
importance of finality in bankruptcy proceedings against the appellant’s right to review and
relief” and will dismiss an appeal “when, even though effective relief could conceivably be
fashioned, implementation of that relief would be inequitable.” Beeman v. BGI Creditors’
Liquidating Trust (In re BGI, Inc.), 772 F.3d 102, 107 (2d Cir. 2014) (quotations omitted).6
Thus, by definition, a finding of equitable mootness represents a determination that a balancing
of equities dictates that an appellant no longer be permitted to challenge and potentially upset the
completion and finality of a reorganization.
As a threshold matter, Ahuja’s non-committal argument about the possibility of
equitable mootness, which he expressly “disputes” would apply to his appeal (Ahuja Memo at 5),
is insufficient to demonstrate a threat of irreparable injury to support a stay. “Irreparable harm
must be neither remote nor speculative, but actual and imminent.” BGI, 504 B.R. at 762
(emphasis added). Here, far from showing the imminent threat of actual injury, Ahuja posits that
6 In the Second Circuit, “[r]eviewing courts presume that it will be inequitable or impractical to
grant relief after substantial consummation of a plan of reorganization.” Aetna Cas. & Sur. Co. v. LTV
Steel Co. (In re Chateaugay Corp.), 94 F.3d 772, 776 (2d Cir. 1996). Substantial consummation occurs
upon a “transfer of all or substantially all of the property proposed by the plan to be transferred;
assumption by the debtor or by the successor to the debtor under the plan of the business or of the
management of all or substantially all of the property dealt with by the plan; and commencement of
distribution under the plan.” 11 U.S.C. § 1101(2).
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if the Plan is substantially consummated following the requested approval of the Change of
Control Application by the FCC, LightSquared will likely argue that his appeal has been
equitably mooted—although, Ahuja contends, such an argument would be flawed and
unavailing. Ahuja cannot have it both ways—seeking a stay based solely on the possibility that
his appeal may be equitably mooted while simultaneously asserting that equitable mootness
would not, in fact, apply to his appeal.
Moreover, even if Ahuja were to acknowledge (as he does not) that his appeal
would be mooted in the event the Plan were consummated, “[a] majority of courts have held that
a risk of mootness, standing alone does not constitute irreparable harm.” Adelphia, 361 B.R. at
347 (collecting cases).7 In determining whether the possibility of equitable mootness constitutes
irreparable injury, courts also consider the likelihood that the appellant would prevail on appeal.
See, e.g., BGI, 504 B.R. at 763 (“[T]he seriousness of that threat [of equitable mootness] is
inextricably related to the appellants’ likelihood of success on the merits.”) (quotation omitted).8
The same principle applies outside of the bankruptcy context: the Second Circuit has similarly
evaluated the strength of an appellant’s arguments in determining whether the risk that an appeal
could be rendered moot (there, in the constitutional sense) constitutes irreparable harm
7 See also In re Calpine Corp., No. 05-60200 (BRL), 2008 Bankr. LEXIS 217, at *13-14 (Bankr.
S.D.N.Y. Jan. 24, 2008) (Lifland, J.) (“[M]erely invoking equitable mootness . . . – a risk that is present in
any post-confirmation appeal of a chapter 11 plan – is not sufficient to demonstrate irreparable harm.”);
In re Bd. of Dirs. of Multicanal S.A., No. 04-10280, 2005 Bankr. LEXIS 1865, at *6 (Bankr. S.D.N.Y.
Jan. 6, 2005) (Gropper, J.) (“There is substantial authority, however, that the risk of an appeal being
rendered moot does not in and of itself constitute irreparable harm, even if it may be a relevant factor”);
In re Baker, No. 05-3487, 2005 U.S. Dist. LEXIS 36969, at *29-30 (E.D.N.Y. Aug. 31, 2005) (“As other
courts have noted, the possibility that an appeal will be rendered moot by a denial of stay does not, in and
of itself, constitute irreparable harm”).
8 See also Laroe Estates, Inc. v. TD Bank, N.A. (In re 473 W. End Realty Corp.), No. 14 CV 2321,
2014 U.S. Dist. LEXIS 77036, at *5 (S.D.N.Y. May 12, 2014) (Briccetti, J.) (“[T]he risk of mooting an
appeal does not constitute irreparable injury when, as here, the appeal is unlikely to succeed.”); DBSD,
2010 U.S. Dist. LEXIS 44996, at *6 (“The seriousness and likelihood of the irreparable injury threatened
in a case such as this . . . is inextricably related to the appellants’ likelihood of success on the merits.”).
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warranting a stay. See S.E.C. v. Daspin, 557 F. App’x 46, 49 (2d Cir. Feb. 5, 2014) (“Daspin
also argues that, absent a stay, he would be compelled to testify, effectively mooting his appeal
and causing irreparable harm by depriving him of his appellate rights. . . . However, Daspin’s
appeal is unlikely to succeed. Consequently, denying a stay would not deprive him of significant
rights. Thus, this factor supports denying a stay.”).
Because the only potential injury identified by Ahuja is the risk of equitable
mootness (which he disputes), the question of whether Ahuja will suffer irreparable harm merges
with the question of whether he has shown a sufficient likelihood of prevailing on appeal. Here,
for the reasons set forth in LightSquared’s appellate brief and at oral argument, there is no
substantial possibility that Ahuja will prevail in this appeal. This alone justifies denial of
Ahuja’s motion.9
Moreover, as Ahuja’s own case authority reflects, modern decisions will consider
a risk of equitable mootness as constituting irreparable harm only if the appeal at issue presents a
“significant claim of error.” See Adelphia, 361 B.R. at 348; see also BGI, 504 B.R. at 763;
DBSD, 2010 U.S. Dist. LEXIS 44996, at *6. For example, in Adelphia, perhaps the leading case
espousing this view in this district, Judge Scheindlin found a risk of equitable mootness
constituted irreparable harm sufficient to warrant a stay pending appeal (conditioned on posting a
bond for $1.3 billion) where the appellants asserted a failure by the plan proponents to comply
with a key order of the bankruptcy court, and the bankruptcy court’s failure to enforce its own
9 LightSquared will not respond at length to Ahuja’s summary presentation on the “merits” of his
appeal (Ahuja Memo at 8-11) other than to observe that the summary (1) repeats Ahuja’s erroneous
attempt to apply the “new value” case authority, which scrutinizes attempts by equity holders to “leap
ahead” of secured and unsecured creditors more senior in the capital structure, to a situation where this
simply did not occur, and (2) continues Ahuja’s obdurate refusal to recognize that the Bankruptcy Court
expressly declined to adopt LightSquared’s valuation because the Bankruptcy Court perceived continuing
uncertainty that LightSquared’s quest for FCC approval to conduct terrestrial wireless broadband
operations would be resolved favorably.
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order, all amounting to what Judge Scheindlin believed “could be a fundamental violation of
[the] Apellants’ constitutional due process rights.”10 361 B.R. at 358; see also id. at 360. In
contrast, in DJK Residential, Judge Lynch held that the possibility of equitable mootness did not
qualify as irreparable harm where the appellant presented “merely an argument that the
Bankruptcy Court was wrong on the merits of two decisions.” 2008 U.S. Dist. LEXIS 19801, at
*10 (specifically distinguishing Adelphia). Here, as in DJK Residential, Ahuja argues only that
the Bankruptcy Court committed legal error; Ahuja raises no objection that compares to the
constitutional claims at issue in Adelphia.11 Thus, the possibility that Ahuja’s appeal may be
rendered moot does not qualify as irreparable harm.
The cases cited by Ahuja in support of his irreparable injury argument are not on
point. The possibility that an appeal would be mooted, under the equitable mootness doctrine or
otherwise, was not at issue in either Texaco Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir. 1986),
rev’d on other grounds, 481 U.S. 1 (1987), or Beogradska Banka A.D. v. Superintendent of
Banks (In re Agency for Deposit Ins., Rehab., Bankr. and Liquidation of Banks), No. 03-9320,
2004 U.S. Dist. LEXIS 3407 (S.D.N.Y. Mar. 4, 2004). In both BGI and DBSD, the district
courts did not find that there was irreparable injury and ultimately denied the movant’s request
for a stay pending appeal. BGI, 504 B.R. at 766, 770; DBSD, 2010 U.S. Dist. LEXIS 44996, at
*6, 10. And the approximately two decades-old decisions in In re Country Squire Assocs. of
10 Moreover, as discussed below, Judge Scheindlin required the appellants to post a bond
“commensurate with the threatened loss to the non-moving parties . . . in the amount of $1.3 billion.”
Adelphia Commc’ns, 361 B.R. at 368.
11 Ahuja tries to invest his appeal with some greater significance by asserting that it “concerns
whether the absolute priority rule may be circumvented via a negotiated settlement, and therefore has
major implications.” (Ahuja Memo at 11.) Apart from the fact that his appeal is premised on a
misreading of the absolute priority rule and of the key Supreme Court decision on which he purports to
rely, Ahuja misdescribes the issue presented. LightSquared does not assert that the absolute priority rule
may be overridden by a negotiated settlement; rather, it asserts that the Plan conforms entirely to the
absolute priority rule. The “issue” contrived by Ahuja in an attempt to support his stay request is simply
not an issue presented by his appeal.
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Carle Place, L.P., 203 B.R. 182 (B.A.P. 2d Cir. 1996), and Lutin v. United States Bankruptcy
Court (In re Advanced Mining Sys.), 173 B.R. 467 (S.D.N.Y. 1994), did not address appeals
from confirmed chapter 11 plans, and are out of step with the majority of decisions, including the
more modern decisions from this circuit, which hold that the possibility of equitable mootness is
not sufficient by itself for a finding of irreparable harm. Cf. footnote 7 supra. Moreover, in
contrast to Ahuja here, the appellants in Country Squire and Advanced Mining had a substantial
likelihood of success on their appellate claims. See Country Squire, 203 B.R. at 184; Advanced
Mining, 173 B.R. at 470.12
The possibility that Ahuja’s appeal may be deemed equitably moot at a future
date should not be viewed as an “unfairness” requiring relief. As the doctrine’s name implies,
“equitable” mootness is a judicial recognition that there are competing equities at issue when an
objector like Ahuja appeals from a bankruptcy court confirmation order. If Ahuja’s appeal is
ultimately found to be moot, it will only be because a federal court has determined that the other
stakeholders’ interests in finality—which arguably are at their apex in the unique context of
bankruptcy reorganization under chapter 11—are paramount to any individual interest Ahuja
may have in the continued prosecution of his appeal.
12 The unpublished order in In re DBSD North America, Inc., No. 10-1175, ECF No. 222 (2d Cir.
Oct. 5, 2010), which Ahuja cited in his June 17, 2015 letter to the Court but not in his motion papers is
also inapposite. Although the movants in DBSD argued that they would suffer irreparable injury from
equitable mootness, the two-sentence order did not address these arguments, and in fact was
unaccompanied by any supporting reasoning, and is therefore not entitled to any precedential weight.
See, e.g., Orange Cnty. Water Dist. v. Unocal Corp., 584 F.3d 43, 51 (2d Cir. 2009) (“Although our
decision in MTBE could be read to suggest that challenges based upon the governmental unit exception to
§ 1452(a) cannot be waived under § 1447(c), a sub silentio holding is not binding precedent.”) (quotation
omitted).
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B. Factor 3: The Potential Harm to LightSquared and Its Stakeholders
Independently Necessitates Denial of a Stay
Ahuja’s stay request is further undermined by the substantial, and potentially
catastrophic injury that LightSquared and its stakeholders will suffer during the pendency of the
stay—harms against which Ahuja strenuously asserts he should not be required to supply a bond.
See N.Y. Skyline, 520 B.R. at 14 n. 77 (“[T]he failure of a party to address its burden with respect
to a bond may weigh against granting a stay.”). As discussed below and in the accompanying
declaration of Mark Hootnick, LightSquared faces: (1) daily accretions of roughly $1.8 million
in its debt and preferred equity that will sap the limited working capital of L2LP’s reconstituted
successor (“New LightSquared”) (which itself will consist of newly borrowed funds) and saddle
it with additional debt and preferred equity obligations it would not incur but for the stay;
(2) potential increases in the commitment fees payable to third-party lenders in connection with
the projected exit financing; (3) the possibility that LightSquared will be required, as early as
December 10, 2015, to pay as much as $50 million in additional “adequate protection” payments
to L2LP’s secured creditors, at the behest of its largest secured creditor, SP Special
Opportunities, LLC (“SPSO”), as a result of LightSquared’s continued use of cash collateral;13
(4) the expiration, on December 15, 2015 and December 31, 2015, respectively, of the third-
party commitments for first and second lien exit financing, which would kill the Plan and
eliminate the payments to creditors contemplated thereunder, including the approximately $1.5
billion payable on the secured claim of SPSO; and (5) the expiration of the $700 million of
outstanding L2Inc and L2LP “debtor-in-possession” (“DIP”) loans, with no presently identifiable
13 See generally 11 U.S.C. § 363(e) (authorizing bankruptcy courts to condition use of property on
“adequate protection” of non-debtor party’s interest in that property). Although any “adequate
protection” payments would be offset against the amounts L2LP owes to its secured creditors, the order
directing the payments could require cash payment, thus depleting LightSquared’s liquidity.
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means of refinancing, leading to further defaults and a bankruptcy death spiral. Ahuja is
certainly aware that these injuries would flow from the stay he seeks, yet he disingenuously
suggests that “[a] stay will not cause substantial injury to LightSquared or any other party”
because “LightSquared in not on the verge of running out of cash.” (Ahuja Memo at 6.)14
Lest Ahuja suggest that LightSquared is painting an unduly alarmist picture,
LightSquared notes that the stay Ahuja seeks would operate in this Court and during the
pendency of a possible appeal to the Second Circuit. According to the “Federal Court
Management Statistics” published by the Administrative Office of the U.S. Courts, for the twelve
month period ending March 31, 2015, the Second Circuit’s “Median Time From Filing Notice of
Appeal to Disposition” was 10 months, which would extend the stay well into 2016. (Burke
Decl. Ex. C.) Although it is within the Second Circuit’s discretion to grant an expedited
schedule, the ultimate disposition of an expedited appeal (were the Circuit inclined to grant it)
could well occur after the December 15, 2015 expiration of LightSquared’s exit financing
commitment. All the injuries listed above would occur.
1. Daily Accretions of Interest and Preferred Dividends Would Cause
LightSquared to Incur Millions of Dollars in Additional Expenses
To fund the post-bankruptcy operations of New LightSquared and the
distributions of cash and new debt and equity instruments to stakeholders promised under the
Plan, the Plan calls for multiple financings, including a first lien “Working Capital Facility” and
14 Ahuja’s false suggestion that LightSquared will not run out of cash is of a piece with his equally
false suggestions that this is a “solvent” debtor reorganization (Ahuja Memo at 7) and that any injury to
LightSquared arising from a stay will merely affect the “equity cushion” Ahuja asserts belongs to him
(id.). In making these inaccurate claims, Ahuja flagrantly ignores the fact that LightSquared will indeed
run out of cash at the end of the year unless the financings and other transactions contemplated by the
Plan are completed by then, and that the limited working capital LightSquared will have under the Plan
following emergence is entirely dependent upon the compromises made by parties senior to him in the
capital structure, accepting less than payment in full of their claims and thereby enabling New
LightSquared to sustain additional borrowings required to obtain that working capital. There is no
“equity cushion,” and the working capital borrowed as a result of compromises made by others certainly
does not belong to Ahuja.
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a “Second Lien Exit Facility.” (Plan, Art. IV, § B.3.) While LightSquared remains in
bankruptcy, interest is accreting on L2Inc’s and L2LP’s current DIP financings at rates of 9%.
(Hootnick Decl. ¶ 7.) Under the Plan, these DIP loan obligations will be repaid in full from the
funds available to New LightSquared under the Working Capital Facility. (Plan, Art. IV,
§ B.3(a)(i).) Thus, every additional dollar of DIP debt that accretes during a stay pending appeal
will reduce New LightSquared’s working capital by the same amount. The current aggregate
daily accretion is approximately $168,000, which translates to $5 million per month. (Hootnick
Decl. ¶ 7.)
Similarly, interest is accreting on L2LP’s prepetition secured debt at a rate of
17%. (Hootnick Decl. ¶ 13.) This debt will be exchanged dollar-for-dollar for new debt of New
LightSquared under the Second Lien Exit Facility. (Plan, Art. III, §§ B.7, B.8; Hootnick Decl.
¶ 15.) Every additional dollar of interest that accretes on the prepetition secured debt during a
stay would therefore increase the principal amount of New LightSquared’s obligations under the
Second Lien Exit Facility. The aggregate daily accretion is approximately $1.2 million, which
translates to approximately $37 million per month. (Hootnick Decl. ¶ 13.) And the injury to
LightSquared represented by this increased principal amount of post-emergence debt would be
compounded further by the interest that would accrue on that additional principal amount over
the term of the Second Lien Exit Facility.
L2Inc’s prepetition secured debt and the preferred equity interests in L2LP and
L2Inc are also currently accreting at rates of 20% and 9.75%, respectively. (Hootnick Decl. ¶¶
13, 18.) Under the Plan, prepetition secured debt in L2Inc and L2LP preferred equity interests
will be exchanged dollar-for-dollar, on a fully accreted basis, for new preferred equity interests
in New LightSquared with a liquidation preference equal to the accreted value of the existing
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debt and interests that are being exchanged. (Plan, Art. III, §§ B.6, B.13.) Likewise, additional
accretion of L2Inc preferred equity interests increases the amount of preferred equity in New
LightSquared that will be distributed pursuant to the Plan.15 (Plan, Art. IV, § B.2(c)(ii);
Hootnick Decl. ¶ 20.) As the new preferred equity interests of New LightSquared will be subject
to mandatory redemption in cash at a future date (Hootnick Decl. ¶ 29), every additional dollar
by which the existing preferred equity interests and the L2Inc secured debt accrete (other than
accretion on those interests that will be satisfied by the issuance of new preferred equity to SIG)
translates into a future cost to New LightSquared.
The aggregate cost to New LightSquared from all of this interest and preferred
equity accretion ultimately would depend on the duration of the stay. By way of example,
however, assuming that LightSquared were in a position to consummate the Plan on September
30, 2015, and that a stay continued through December 15, 2015, the projected cost to
LightSquared would be approximately $145 million.16 (Hootnick Decl. ¶ 30.)
Courts have recognized that “the accrual of interest is a real and significant harm
that must be considered” when evaluating the harm to a debtor company during an appeal.
Adelphia, 361 B.R. at 353; see also Calpine Corp., 2008 Bankr. LEXIS 217, at *16-17
(estimating that the debtors’ fees and interest “could amount to over $250 million, a significant
15 Pursuant to the Plan, holders of L2Inc Preferred Stock other than SIG Holdings, Inc. (“SIG”) will
receive an amount of preferred equity in New LightSquared equal to such holders’ pro rata share of the
aggregate L2Inc Preferred Stock Liquidation Preference. (Plan, Art. III, § B.14(b).) These non-SIG
holders account for approximately 25% of the aggregate amount of outstanding L2Inc Preferred Stock.
16 LightSquared uses September 30, 2015 in the hypothetical discussed herein for ease of
calculation only because certain interest and preferred equity amounts compound on that date. Were the
FCC to approve the Change of Control Application prior to September 30, 2015, the aggregate cost from
a stay would be even greater than suggested in LightSquared’s hypothetical.
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portion of which would have to be paid in cash upon emergence”).17 Here, the “real and
significant harm” LightSquared would suffer in the form of millions of dollars of additional,
unmitigated expenses justifies the Court denying even a brief stay pending this Court’s decision.
LightSquared previewed the several harms it could suffer from even a limited stay in its
July 17, 2015 letter to this Court. Contrary to Ahuja’s false assertion (Ahuja Memo at 12),
LightSquared showed unambiguously that a delay in emergence from bankruptcy caused by a
stay pending appeal will increase the absolute amount of New LightSquared’s indebtedness post-
emergence. LightSquared also showed that such a delay in emergence would reduce the amount
of working capital available to New LightSquared. Each of the foregoing represents a
quantifiable injury that would be directly attributable to the stay, and Ahuja’s suggestion that
only the former would constitute cognizable injury is pure nonsense. Both are harmful to New
LightSquared, and the amount of the injury is plainly quantifiable.
Ahuja’s argument that there is no injury because interest payments and preferred
dividends will accrue at higher rates under LightSquared’s exit financing is both factually untrue
and non-responsive to the injury LightSquared will suffer. In the first place, the effective
blended interest rate currently being paid on the aggregate indebtedness that will be refinanced
under the Plan—roughly $700 million of DIP loans and $3 billion of prepetition secured debt—is
significantly greater than the blended interest rate that would be payable today on such amounts
under the exit financing. (Hootnick Decl. ¶ 26.) In the second place, New LightSquared’s exit
financing indebtedness and its post-emergence preferred equity obligations are for specified
terms, which will only begin to run upon emergence. (Hootnick Decl. ¶¶ 27, 29.) Postponing
17 The same is true with respect to professional and other administrative fees. See Adelphia, 361
B.R. at 353. While in bankruptcy, LightSquared continues to incur professional fees and expenses that it
would not incur outside of bankruptcy. LightSquared has budgeted $5.4 million per month for
bankruptcy-related professional fees and expenses for the remainder of 2015. (Hootnick Decl. ¶ 21.)
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LightSquared’s emergence from bankruptcy will not shorten the terms of those obligations and
therefore will not create any savings to New LightSquared. To the contrary, delaying
LightSquared’s emergence simply increases the principal amounts of its post-emergence
indebtedness and preferred equity obligations. Every additional dollar of accretion in
LightSquared’s current financing and preferred equity interests after the point when
LightSquared could have emerged from bankruptcy but for a stay is a pure loss to New
LightSquared—an amount that it would not otherwise have been required to pay.
2. The Commitment Fee for the Working Capital Facility Will Increase
by as much as $30 Million with the Passage of Time
Under the credit agreement for the $1.5 billion Working Capital Facility,
LightSquared is obligated to pay a one-time commitment fee, which is a percentage of the total
loan amount. The percentage applicable to calculate the commitment fee depends on how much
time elapses before the loan is funded, with the fee amount “stepping up” at agreed intervals, the
longer the commitment remains undrawn. Assuming, for example, that a stay continues beyond
September 12, 2015, LightSquared would be required to pay a 1.5% fee, or $22.5 million,
instead of the 1% fee, or $15 million, it would pay if the lenders funded the Working Capital
Facility before then. (Hootnick Decl. ¶ 24.) This would result in a further cost to LightSquared
of $7.5 million. The commitment fee steps up twice more, in October and November 2015, and
by December 15, 2015, LightSquared would be required to pay a fee of $45 million—$30
million more than if it were to close on or before September 12, 2015. (Hootnick Decl. ¶ 24.)
Any increase in the amount of the fee arising by reason of a stay would represent additional
injury Ahuja would have the Court ignore.
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3. LightSquared Could Be Compelled to Make a $50 Million “Adequate
Protection” Payment to Its Prepetition Lenders
Ahuja makes misleading reference to a purported “finding” by the Bankruptcy
Court at a post-confirmation “cash collateral” hearing on April 7, 2015 that there would be no
material risk of diminution in value of its spectrum assets were LightSquared to remain in
bankruptcy. (Ahuja Memo at 6; Samet Decl. Ex. 7.) The Bankruptcy Court made no such
finding. The April 7 hearing actually addressed objections filed by SPSO, which holds half of
L2LP’s prepetition secured debt, to LightSquared’s proposal to stop making adequate protection
payments of $6.25 million per month for the benefit of the L2LP prepetition secured lenders, and
to offer them instead a superpriority claim for any loss suffered in the event of a diminution in
asset value. Adopting a “wait and see” approach, the Bankruptcy Court entered an order
preserving all of SPSO’s rights to seek additional adequate protection and set December 10,
2015 as a control date. (Burke Decl. Ex. D (Bankruptcy Court Order ¶¶ 7(b)(i), 28).)
The Bankruptcy Court specifically noted, however, that if LightSquared had not
completed its exit from bankruptcy by then or was not clearly set to do so by December 15, 2015
(when its exit financing commitment would expire), SPSO would be free to exercise its remedies
and seek retroactive payment of adequate protection for the eight months from May through
December 2015—an aggregate total of $50 million at the previously prevailing monthly rate.
Critically missing from Ahuja’s misleading description of the April 7 hearing and its outcome is
the fact that in the circumstances that would cause SPSO to renew its demand for adequate
protection, LightSquared would not have $50 million in cash to make such a retroactive
payment.
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4. The Inability to Close Before Expiration of the Working Capital
Facility Commitment on December 15, 2015 Could Cause the
Reorganization to Fail
Should the Court impose a stay that continues through December 2015, the
impact on LightSquared’s reorganization could be catastrophic. It is a condition precedent to the
Plan becoming effective that the agreements governing the Working Capital Facility and the
Second Lien Exit Facility (the “Working Capital Facility Credit Agreement” and the “Second
Lien Exit Credit Agreement”) “shall have been executed and delivered,” and that “all conditions
precedent to the consummation thereof shall have been waived or satisfied in accordance with
the terms thereof.” (Plan, Art. IX, § B.6.) The continuation of a stay in December 2015,
however, would put the Working Capital Facility in jeopardy. One of the terms and conditions
on which the Working Capital Facility lenders (third parties independent from the plan
proponents) committed to extend credit to New LightSquared is that their loan commitments will
automatically terminate in full on December 15, 2015, if the conditions precedent to the lenders’
obligations are not satisfied prior to that date. (Burke Decl. Ex. E (Term Sheet at 4).) And one
of the conditions precedent in Article IV of the agreement is that the Confirmation Order must be
“unstayed.” (Id.) Thus, if a stay is in effect on December 15, 2015, the lenders under the
Working Capital Facility will cease to have any obligation to extend credit to New LightSquared.
The Second Lien Exit Facility would be similarly at risk. Section 3(d) of the
Second Lien Commitment Letter provides that it is a condition to the lender’s loan commitment
that the Confirmation Order be “unstayed.” (Burke Dec. Ex. F.) And the lender retains the right
to terminate its loan commitment on December 31, 2015, at the latest. (Id. § 11.)
If the funds available under either of these commitments are not available,
LightSquared will be unable to meet its obligations to its stakeholders and the Plan will fail.
Although Ahuja will doubtless argue that LightSquared could seek replacement financing, there
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is significant uncertainty as to whether it could succeed, and, if so, the economic terms on which
such replacement funding could be had. (Hootnick Decl. ¶ 32.)
Notably, LightSquared’s current DIP financing, on which it is relying to fund its
operations and restructuring costs during bankruptcy, will mature on December 30, 2015.
(Burke Decl. Ex. G (DIP Order ¶ 2(a)); Hootnick Decl. ¶ 9.) By that date, LightSquared is
projected to owe approximately $700 million under its DIP financing. (Hootnick Decl. ¶ 9.) The
Plan provides for LightSquared’s DIP loan obligations to be repaid substantially from the
proceeds of the Working Capital Facility. (Plan, Art. IV, § B.3(a)(i).) If the lenders’
commitments under that facility terminate on December 15, 2015, LightSquared would be unable
to repay its DIP lenders, and likewise would have no funds to continue operations, making
liquidation inevitable. In such circumstances, stakeholder recoveries would be drastically
reduced and, for some, eliminated entirely.
Judge Kaplan’s decision in DBSD denying a stay pending appeal of his judgment
is highly instructive here. In DBSD, as in this case, the appellants sought to enjoin the debtors
from consummating a confirmed bankruptcy plan in the event that the FCC ruled on certain
change of control applications. 2010 U.S. Dist. LEXIS 44996, at *4. And, as here, the
effectiveness of the bankruptcy plan in DBSD was contingent on a financing commitment that
was likely to expire during the pendency of the appeal. Id. at *7-8. On the record before him,
Judge Kaplan found that there was “at least a cognizable risk that [the financing commitment]
w[ould] not be extended” and that “[i]f the commitment in fact does expire before the plan
becomes effective, the entire restructuring may fall apart.” Id.; see also id. at *8 (“I am not so
naïve as to believe that an extension of the financing commitment is not at least a possibility.
Nor, however, am I so naïve as to assume that it inevitably will be extended.”). Judge Kaplan
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therefore held that the threat of harm to the debtors’ reorganization weighed against granting a
stay. Id. at *8. The exact same reasoning applies equally here. 18
Although the Second Circuit subsequently granted a stay pending appeal in an
unpublished order in DBSD, by the time it did so counsel for the plan proponents (who had
provided the financing commitment) had represented to the district court that they were
“unlikely” to withdraw their commitment and had in fact extended their exit financing
commitment multiple times. (See Burke Decl. Ex. H at 36:24-37:1; id. Ex. I ¶ 13.)
Here, unlike in DBSD, Ahuja (who bears the burden of proof) has presented no
evidence that LightSquared’s lenders will extend their exit financing commitments. The situation
here is therefore analogous to the situation before Judge Kaplan, except that the risk that
LightSquared’s lenders may not extend their commitments is greater than in DBSD. The DBSD
exit lenders were the plan proponents, who would control the debtor upon consummation of the
plan. Here, in contrast, the exit financing will come from third parties that will have no
relationship with New LightSquared except as lenders, and hence will have far less incentive to
extend their commitments (particularly in the rising interest rate environment predicted by year-
end).19
18 See also DJK Residential, 2008 U.S. Dist. LEXIS 19801, at *11 (debtors would be irreparably
harmed by a stay which would “jeopardize [the debtors’] exit financing, which may require renegotiation
of their creditor agreements,” and “could cause substantial harm to the business”); Calpine Corp., 2008
Bankr. LEXIS 217, at *15-16 (“[T]he Debtors’ operations will be funded through a $7.6 billion secured
exit-financing facility. . . . A stay of the Confirmation Order would present a substantial risk that a
condition precedent to financing will fail and the Debtors could lose their exit financing, forcing them
back to restructuring, looking to obtain new exit financing in an unfavorable capital market environment.
The evidence shows that if the Debtors were required to negotiate a new exit financing commitment at
this stage, the Debtors would incur an additional $900 million in aggregate interest expense alone.”)
(denying request for stay).
19 In addition to imperiling LightSquared’s exit financing, a stay could also lead to termination of
the “Plan Support Agreement” between and among the proponents of the Plan (other than LightSquared).
It is a condition precedent to the Plan becoming effective that this Plan Support Agreement be “in full
force and effect.” (Plan, Art. IX, § B.11.) If the Confirmation Order remains stayed on December 15,
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Finally, as set forth in the Hootnick Declaration, the Court should consider the
impact that a stay would have on New LightSquared’s ability to achieve its business plan. The
Plan will provide finite working capital, and the competitive reality of the wireless broadband
market will provide limited time, for New LightSquared to accomplish all that it must (e.g.,
resolving regulatory issues) in order to become a viable presence as a provider of terrestrial
wireless broadband services. The establishment of a viable reorganized debtor is, of course, a
principal goal of reorganization chapter 11.20 A stay would be antithetical to this interest in
multiple ways, not only diverting New LightSquared’s limited financial resources, but also,
effectively, stealing from it the critical time it needs to implement its business plan. See DJK
Residential, 2008 U.S. Dist. LEXIS 19801 at *11-12 (irreparable injury to non-movants where it
was “in the interest of virtually all parties . . . for the plan adopted by the Bankruptcy Court to
succeed, and for Debtors to continue in operation” and a stay “would jeopardize [the debtor’s]
ability to keep their business afloat” including by “limit[ing] their liquidity”). For this reason,
too, a stay is inappropriate.
C. Factor 4: The Public Interest Favors LightSquared’s Emergence from
Bankruptcy
Finally, Ahuja cannot show that the public interest supports a stay. To the
contrary, the public interest generally favors the expeditious resolution of bankruptcy
2015, however, any party to the Plan Support Agreement can terminate that agreement. (Burke Decl. Ex.
J, at § 4.)
Ahuja argues that there is no evidence that any party would terminate the Plan Support
Agreement (Ahuja Memo at 6), but, again, it is Ahuja, not LightSquared, who bears the burden of proof,
and he must establish that the parties to the Plan Support Agreement would not terminate that agreement.
He has not done so, and effectively asks the Court to speculate that termination would not occur. Such
speculation is no substitute for the required showing, and it in fact fails to consider the grave economic
implications should LightSquared not exit bankruptcy by December 15, 2015 discussed above.
20 See Official Comm. of Unsecured Creditors v. PSS Steamship Co. (In re Prudential Lines Inc.),
928 F.2d 565, 573 (2d Cir. 1991) (“[A] paramount and important goal of Chapter 11 is the rehabilitation
of the debtor by offering breathing space and an opportunity to rehabilitate its business and eventually
generate revenue.”) (quotation omitted).
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proceedings, and that is especially so here, where LightSquared has been in bankruptcy for more
than three years and Ahuja is the sole objector seeking to block consummation of an otherwise
consensual plan. See DBSD, 2010 U.S. Dist. LEXIS 44996, at *9-10 (“If there is a public
interest at stake here, it is in allowing companies that have confirmed plans of reorganization to
consummate those plans and emerge from chapter 11 without unnecessary delay so that they may
become successful entities. Certainly no public interest would be served by granting appellants
even a 14-day stay in circumstances in which the existence of such a stay could result in the
expiration of the commitment for exit financing and the failure of the plan of reorganization.”);
In re Adelphia Commc’ns Corp., 368 B.R. 140, 284 (Bankr. S.D.N.Y. 2007) (Gerber, J.) (“In this
case, 30 of 30 classes that voted on the plan supported it . . . It would be grossly unconscionable,
in my view, to thwart the will of such an overwhelming majority to accommodate the desires of
such a small minority, who are simply dissatisfied with the Settlement under the Plan”).21 Any
further delay in LightSquared’s emergence from bankruptcy, therefore, will only harm the public
interest.
II. ANY STAY MUST BE CONDITIONED ON A BOND SUFFICIENT TO
PROTECT LIGHTSQUARED AND ITS STAKEHOLDERS FROM ALL INJURY
FLOWING FROM THE STAY
In arguing that no bond should be required, Ahuja advances the novel position
that the need for a bond is governed by the extent of the appellant’s financial resources, rather
than by the scope of the injury a stay would inflict upon the debtor and its stakeholders. As
Ahuja would have it, because his own financial resources are small in relation to the injury he
21 Moreover, in its “National Broadband Plan,” the FCC has announced the policy goals of making
additional electromagnetic spectrum available for mobile broadband use and accelerating terrestrial
deployment of spectrum. (FCC, Connecting America: The National Broadband Plan, at xii, 75, 87-88,
available at https://www.fcc.gov/national-broadband-plan.) The business plan LightSquared is pursuing
will help to achieve both goals, and emergence from bankruptcy, so that LightSquared may proceed in
earnest to achieve these goals, is thus plainly in the public interest.
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would inflict by a stay, he should be excused from posting a bond. Not surprisingly, Ahuja cites
no authority supporting his position.
Should the Court decide to grant Ahuja a stay of the Confirmation Order pending
appeal, the Court plainly should condition the stay on Ahuja’s posting a bond sufficient to cover
all the above-described damages that may arise because of the stay. As LightSquared noted in its
letter dated July 17, 2015, and as the detailed information contained in the Hootnick Declaration
confirms, the damage flowing from even the 14-day stay Ahuja initially sought would exceed
$24 million. A stay that would delay LightSquared’s exit from bankruptcy from September 30,
2015 until December 14, 2015 would require a bond of not less than $230 million, representing
approximately $145 in interest and preferred dividend accruals, $14 million in restructuring
related fees and expenses, $22.5 million in additional Working Capital Facility commitment fees,
and $50 million in potential adequate protection payments that SPSO would almost certainly
demand if it appeared that LightSquared would not exit bankruptcy by December 15, 2015. A
stay that would extend beyond December 15, 2015, would require a multi-billion dollar bond, to
cover the LightSquared stakeholders’ loss of cash payments and other value they would receive
under the Plan.
Imposing such a bond is fully consistent with precedent in this circuit. In
Adelphia Communications, Judge Scheindlin granted a stay pending appeal conditioned on the
appellants posting a bond in the amount of $1.3 billion, designed to cover approximately $490
million of additional interest accretion, $715 million of expected losses, in the form of price
discounts and underwriting fees, from an initial public offering of stock that would be triggered
as a result of the delayed emergence from bankruptcy, plus an additional cushion for professional
fees and other less quantifiable costs. 361 B.R. at 368. Similarly, in Calpine, Judge Lifland
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(former Chief Judge of the Bankruptcy Court) denied the requested stay pending appeal but
noted that had a stay been granted, it would have been conditioned upon “the posting of a bond
to cover the enormous risk of loss to the Debtors, their estates, creditors and interest holders in
the range of $900 million to $1 billion,” to cover additional interest expense the Debtors could
incur if they were unable to close on their existing exit financing. 2008 Bankr. LEXIS 217, at
*21-22 (emphasis added).
Ahuja has shown no reason to justify a departure from the “ordinary full security
requirement” noted in DJK Residential, 2008 U.S. Dist. LEXIS 19801, at *6. Nor can Ahuja
avoid the bond requirement by arguing that the plan proponents agreed to support the Plan
through December 15, 2015, and that he is therefore somehow entitled to a stay without posting a
bond for “at least as long as LightSquared gave itself to close on its exit facilities following FCC
approval of the [Change of Control] Application.” (Ahuja Memo at 14.) While the plan
proponents and the exit lenders are committed until December 15, 2015, it is certainly in the
interests of LightSquared, the plan proponents, and LightSquared’s stakeholders to exit
bankruptcy at the earliest possible date, and there is no question that LightSquared will suffer
injury if, able to exit sooner, it is nevertheless compelled to remain in bankruptcy by a stay.
And, finally, there is no warrant for the 14-day stay without a bond requested by Ahuja. (Ahuja
Memo at 13-14.) Notably, LightSquared did not “give itself” 10 business days to close, but
rather the lenders required LightSquared to use commercially reasonable efforts to close within
that time period, including satisfying conditions that include the Plan becoming effective. That
is an outside date, which further evidences the perceived risk from LightSquared remaining in
bankruptcy longer than is required. The reality is that LightSquared, if unrestrained by a stay,
would seek to close on its financing commitments and exit bankruptcy promptly after a favorable
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FCC determination on the Change of Control Application. In any event, the fact that
LightSquared may, but need not, take up to 10 business days to close on the Working Capital
Facility, does not provide any logical justification for staying LightSquared from closing for the
duration of that period without the protection of any bond.
CONCLUSION
For the foregoing reasons, LightSquared respectfully requests that the Court deny
Ahuja’s motion for a stay pending appeal. In the event the Court grants Ahuja’s motion,
however, LightSquared requests that the Court require Ahuja to post a bond in an amount
commensurate with the potential duration of the stay, computed at not less than of $230 million
for a stay expiring by its terms not later than December 14, 2015, and in an amount not less than
$3 billion for a stay that could, by its terms, extend to and beyond December 15, 2015.
Respectfully submitted,
New York, New York /s/ Michael L. Hirschfeld
Dated: July 23, 2015 Matthew S. Barr
Alan J. Stone
Michael L. Hirschfeld
Andrew M. Leblanc
MILBANK, TWEED, HADLEY & MCCLOY LLP
28 Liberty Street
New York, NY 10005-1413
(212) 530-5000
Attorneys for Debtors and Debtors in Possession
Case 1:15-cv-02342-KBF Document 40 Filed 07/23/15 Page 28 of 28
