Jefferies is coming to market with a $3 billion B term loan backing LightSquared’s exit from Chapter 11, sources said. Roadshows will run through next week.

U.S Bankruptcy Judge Shelley Chapman signed an order last week approving the exit facility, the exact amount and terms of which were filed with the court under seal. In court filings seeking approval of the facility, LightSquared would reveal only that the facility would be large enough to repay the company’s prepetition lenders in full.

Chapman approved an arrangement under which Harbinger Capital Partners, LightSquared’s largest equity holder, agreed to pay up to $80 million in fees related to the deal. LightSquared itself said it would be obligated to pay Jefferies “only” up to $45 million in fees.

The four-year term loan is talked at L+650, with a 1.5% LIBOR floor, and offered at 98.5. Lenders will receive upfront warrants, immediately vested, for 5% of fully diluted ownership, and an additional 10% if the term loan is not repaid within 18 months of closing, sources said.

The loan will include a ticking fee that kicks in at 50% of the spread after 30 days, increasing to the full spread at 90 days.

In addition, the loan will include two three-month extensions, at LightSquared’s option. Each extension would trigger a 50 bps fee.

LightSquared said the exit financing will serve as the cornerstone of its reorganization plan. The company has not yet filed a plan, however – its current exclusive right to file a plan is set to expire on July 15.

Dish Network Corp. Chairman Charlie Ergen last month made a $2 billion stalking-horse bid for LightSquared spectrum, according to a recent report from Bloomberg citing sources who asked not to be named because the deal hasn’t been shown to Judge Chapman. LightSquared would reportedly use the proceeds to pay off its secured debt. The company had until May 31 to accept the offer, Bloomberg reported.

The bid was not openly discussed in court last week, but lawyers for various parties in the case clearly danced around confidential discussions regarding a sale at several points during the hearing. Glenn Kurtz, a partner at White & Case representing the largest group of LightSquared lenders, mentioned an upcoming sale multiple times, as lawyers for LightSquared visibly winced and reminded the court of the confidential nature of those discussions. –Chris Donnelly/John Bringardner

The U.S. Bankruptcy Court overseeing the Chapter 11 proceedings of Arcapita Bank approved the Bahraini investment firm’s reorganization during a hearing in Manhattan today.

Arcapita is effectively liquidating, but because of the nature and structure of its Sharia’ah-compliant investments – including stakes in engineering firm Tensar Corporation and women’s clothing retailer J. Jill – its plan will allow Arcapita to keep its management team in place as they wind down various investments over the next few years. The plan is designed to liquidate Arcapita’s positions at a time that will maximize creditor recoveries, rather than force the firm to sell now at potentially lower prices.

“Reorganizing our business under Chapter 11 in the United States has been a challenging process, but it provided an effective framework to enable us to restructure the firm for the benefit of our investors, creditors, and other stakeholders,” said Arcapita CEO Atif Abdulmalik. The case is a “pioneer” in dealing with Sharia’ah law issues in a large Chapter 11, the U.S. Trustee the bankruptcy said this afternoon.

“This has been a fascinating case for me,” Judge Sean Lane added as he announced his confirmation of the plan.

Arcapita blamed its March 2012 bankruptcy filing on hedge funds that allegedly bought into the $1.1 billion unsecured Murabaha facility backed by Arcapita Investment Holdings Limited (AIHL) – Arcapita’s Cayman Islands subsidiary – seeking to derail its attempts at an out-of-court restructuring. Nonetheless, the contentious and unusual case ultimately resulted in a plan supported by 100% of AIHL creditors, Gibson, Dunn & Crutcher partner Michael Rosenthal, Arcapita’s lead counsel, said today.

Arcapita initially attempted to raise equity to fund a reorganization, but toggled to a liquidation effort last November when it failed to raise enough cash. Arcapita filed its a liquidation plan with the court on Feb. 8, after two months of repeated delays and brief exclusivity extensions designed to give the creditors’ committee a chance to reach agreement on the plan. Arcapita noted a number of potential plan disputes at the time, including the question of allocation among debtor entities of the net value to be received from future exits of the current asset portfolio – one of the main issues that delayed filing of the plan in the first place.

Under the February plan, about $1.102 billion in syndicated facility claims and $100.2 million in Arcsukuk facility claims would see a 64% recovery. General unsecured claims against Arcapita Bank would recover 6.3%, but unsecured claims against AIHL, Arcapita’s Cayman Islands subsidiary, would recover 58%.

Arcapita filed an amended plan and disclosure statement on April 16 that included a hard-fought agreement allowing for the sale of the bankrupt bank’s portfolio investments “at a time and price that maximizes recoveries for creditors and investors who, in most cases, hold majority positions in the portfolio investments managed by Arcapita,” the company said. The nature of Arcapita’s various investments – specifically, a series co-investments sanctioned by Islamic jurisprudence – makes liquidation a more complex and time-sensitive process, the bank has said.

The plan will create a new investment-management company known as AIM, staffed by members of Arcapita’s senior management, to manage the portfolio investments on a day-to-day basis until they can be sold at a price that maximizes returns. The creation of AIM was “the only feasible way” that Arcapita could ensure existing management agreements, administration agreements, and syndication proxies remained in place, the company said.

Under the plan approved today, a new $550 million Sukuk facility, with a 12% profit, will be allocated 15% to creditors of Arcapita Bank, 85% to creditors of AIHL. Arcapita’s liquidation will go to fund new Arcapita class A shares and new Arcapita ordinary shares, designed to repay in full AIHL and Arcapita Bank creditors, respectively. The class A shares, with a redemption preference of $810 million, will be split with 45% going to creditors of Arcapita Bank, and 55% to creditors of AIHL. New Arcapita ordinary shares, with a dividend threshold of $1.425 billion, will go 97.5% to Arcapita Bank, subject to dilution by the New Arcapita warrants, and 2.5% to creditors of AIHL.

Judge Lane yesterday also granted interim approval of a new $175 million Shari’ah compliant debtor-in-possession credit facility provided, by Goldman Sachs, to replace Arcapita’s original $150 million DIP and provide “much needed additional liquidity” to see the firm through its exit from Chapter 11. The DIP will roll into a $350 million exit facility provided by Goldman, which will be the reorganized firm’s sole secured obligation upon exit, Rosenthal said.

The plan includes the terms of an agreement reached last week with Standard Chartered Bank, Arcapita’s sole secured creditor, under which SCB’s $96.6 million in claims will be paid in cash from the proceeds of the exit facility, subject to a $2 million reduction of its adequate protection claims. SCB’s claims stem from two $50 million Murabaha facilities extended to Arcapita in 2011.

The SCB settlement also provides that a facility for one of Arcapita’s portfolio investments, Chinese wind-energy developer Honiton Energy, will be restructured “on terms that are favorable to Arcapita,” the bank said. Honiton entered into an RMB362 million bridge facility agreement with SCB China in March 2011. SCB China demanded repayment of the loan this past March, but Honiton was unable to pay.

In addition to Gibson Dunn, Arcapita was advised by Linklaters as its corporate counsel, Trowers & Hamlins as its international counsel on Bahrain matters, and Hatim S. Zu’bi & Partners as its Bahrain counsel. The firm retained KPMG as its accountant and Rothschild as its financial adviser during its restructuring. – John Bringardner

Milton, Ga.-based battery maker Exide Technologies filed for Chapter 11 protection in Wilmington, Del., early this morning, as expected, blaming the rising price of lead and the loss of one its main customers, Wal-Mart, among other things.

The company’s initial court filings listed total assets of $1.894 billion against debts of $1.142 billion. Exide’s principal debt consists of a $160 million asset-backed loan facility, $675 million in 8.625% senior secured notes, and $51.9 million in convertible notes. Exide also listed about $103.5 million in general unsecured debt as of its filing.

JPMorgan Chase Bank will provide the company with a $500 million debtor-in-possession credit facility, significantly more than the $200 million DIP Exide reportedly shopped in recent weeks. The DIP will consist of a $225 million first-out asset-based revolver and a $275 million second-out term loan facility, according to court filings.

The cost of lead, which represents about 46% of Exide’s cost of goods sold, has risen in recent years, putting pressure on the company’s liquidity, Phillip Damaska, Exide’s executive vice president and chief financial officer, said in court filings. Exide typically manages the fluctuating price of lead through its own battery recycling facilities, but the April shutdown of its recycling plant in Vernon, Calif., exacerbated higher spent-battery costs and lead-related price increases, Damaska said.

The California Department of Toxic Substances Control issued an April 24 order suspending Exide’s operations in Vernon, a secondary lead-recycling facility, alleging the facility’s underground storm-water system was not in compliance with state requirements. Exide appealed the decision during a three-day administrative law hearing in California last week, arguing the closure was tied to pollution data from December 2012, and that the plant has since reduced pollution.

Damaska also cited “intense competition” in the battery market in recent years, especially in auto parts retail and mass merchandise. Specifically, Wal-Mart, one of the company’s main customers, designated Johnson Controls, Exide’s main competitor, as its sole supplier of transportation batteries in 2010. The switch cost Exide about $160 million in annual revenue, but more importantly it cost Exide an “important and reliable source of battery cores under a captive-core arrangement with Wal-Mart,” Damaska said.

Exide also suffered from its exposure to the faltering European market, traditionally the source of more than half of the company’s business. Nonetheless, the Chapter 11 filing includes only Exide’s U.S. operations.

Skadden, Arps, Slate, Meagher & Flom is serving as the company’s bankruptcy counsel, with Alvarez & Marsal serving as financial advisor. The company appointed Robert Caruso of A&M as chief restructuring officer.

Exide last filed for Chapter 11 protection in 2002. – John Bringardner

Standard Chartered Bank, the sole secured creditor of Arcapita, signed a plan-support agreement with the bankrupt Bahraini bank, just days ahead of a scheduled confirmation hearing on its Chapter 11 plan.

“As a result of the settlement with Standard Chartered Bank, the last significant hurdle to confirmation has been cleared and the debtors are sprinting toward the finish line in these Chapter 11 cases,” Arcapita wrote in a motion to approve the PSA, filed with the U.S. Bankruptcy Court in Manhattan late Thursday.

Judge Sean Lane is scheduled to hold a confirmation hearing on the company’s plan on June 11, in Manhattan.

The settlement saves the Arcapita estate more than $2 million, secures favorable refinancing for one of Arcapita’s portfolio investments, and simplifies the bank’s post-emergence capital structure, Arcapita said.

SCB extended two $50 million Murabaha facilities to Arcapita in 2011. Under the agreement, SCB’s $96.6 million in principal amount of claims will be paid in cash, subject to a $2 million reduction of its adequate protection claims, with the proceeds of its exit facility.

A facility for one of Arcapita’s portfolio investments, Chinese wind-energy developer Honiton Energy, will be restructured “on terms that are favorable to Arcapita,” the bank said. Honiton entered into an RMB362 million bridge facility agreement with SCB China in March 2011. SCB China demanded repayment of the loan this past March, but Honiton was unable to pay.

SCB filed a lengthy objection to Arcapita’s proposed disclosure statement in April, but its primary concerns were either addressed by late amendments to the document or were deemed confirmation issues, to be discussed as needed in June.

Among other arguments, SCB said at the time that it could not be forced to enter into a Shari’ah-compliant transaction in order to be repaid on its $100 million claim (see “Arcapita disclosure statement blasted by sole secured creditor,” LCD News, April 24, 2013). Arcapita’s revised disclosure statement deleted the requirement that the new SCB facility must be Shari’ah compliant. – John Bringardner