Ligado and Inmarsat Argue Quarterly L-Band Payments in Bankruptcy Court

Quinn Emanuel bankruptcy lawyer Benjamin Finestone, who represented Inmarsat, said the companies' L-band agreement is a lease, citing the word "lease" multiple times in its text and Ligado CEO Doug Smith's referring to it as a lease in testimony. Ligado's arguments that the cooperation agreement is just about coordination of the two companies’ L-band use ignore the leasing terms, Finestone said. “It’s a pretty simple exchange: We deliver the L-band spectrum, and they pay us. Or they are supposed to pay us.” He said Congress never intended that bankruptcy protection meant a renter wasn't obligated to make rental payments. Other creditors in the case aren't required to perform the way Inmarsat is, he said. "We are the only party being told 'You can't have your spectrum back … but we are not going to pay you.'"

Finestone said that while Inmarsat agreed numerous times before the Chapter 11 bankruptcy petition to excuse payment, it wouldn't have been as reasonable had it known Ligado would later use that as an argument against making the quarterly remittance of roughly $16 million due at the end of March.

The coordination agreement is not a lease, because no property interests change hands, Milbank restructuring lawyer Andrew LeBlanc repeatedly argued on behalf of Ligado. Both companies have spectrum rights to use the L band equally and agreed to restrict themselves to non-overlapping parts of the band, he said. "They are delivering nothing to us we don't already have." LeBlanc said FCC rules allow parties with exclusive spectrum rights to lease spectrum, and neither Ligado nor Inmarsat can lease the MSS component of their licenses.

U.S. Bankruptcy Judge Thomas Horan seemed skeptical, questioning how Inmarsat isn't conveying its interest in the L band when it gives up a right to use it in exchange for compensation. LeBlanc said forgoing use of property isn't a transfer of property; it's more akin to an easement than a lease. Horan also questioned whether Ligado is "changing horses midstream" when having referred to the agreement as a lease before the bankruptcy fight. LeBlanc countered that while Ligado and others might have used "lease" as shorthand for describing the Inmarsat agreement, it's not legally a lease as there's no transfer of property interests.

Kirkland & Ellis restructuring lawyer Derek Hunter, representing a group of institutions holding Ligado debt and equity, argued that Inmarsat is trying to derail the bankruptcy proceeding so it can enhance the value of its L-band spectrum holdings once Ligado is out of the way. "It's not about a $[16] million quarterly payment," he said, with Inmarsat objecting.

Even if the court decides the coordination agreement is a lease, it should give Ligado relief from current payments, LeBlanc said. Inmarsat doesn’t immediately need the money, with parent company Viasat having more than $1.5 billion in cash on hand at the end of 2024, he said. Meanwhile, Ligado lacks enough cash for the payment, he said.

LeBlanc told the court that Ligado is still preparing its filing that seeks agency approval of AST SpaceMobile's planned lease of Ligado's L-band spectrum rights, with that spectrum to be used in direct-to-device service. Ligado has said the AST deal is "key" to its bankruptcy restructuring (see 2501060026). However, Finestone said Inmarsat may have objections to the AST deal.

At the close of the hearing, Horan urged Ligado and Inmarsat to pursue mediation of their various conflicts.