Oct 16, 2020 - Economy

A financial lifeline for 5G spectrum

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Illustration: Aïda Amer/Axios

A company that might be at the center of 5G's future is being thrown a lifeline.

Driving the news: Ligado Networks is raising $3.85 billion in expensive new financing to stay out of bankruptcy. The spectrum company's survival could be crucial to the long sought-after, and sometimes controversial, dream of deploying a nationwide 5G network.

Wireless companies like T-Mobile, Verizon and AT&T are racing to acquire spectrum to build next generation 5G wireless networks. The type of spectrum Ligado holds, commonly known as L-Band, is a source of additional capacity and may help traditional carriers boost their ability to create even better networks.

  • One estimate from New Street Research says Ligado’s L-Band spectrum portfolio could be worth anywhere from $12-$23 billion, depending on how the carriers want to use it.

Stay of play: The Federal Communications Commission and Trump administration leaders like Attorney General William Barr, a former telecom exec, and Secretary of State Mike Pompeo firmly back Ligado’s effort. But other U.S. agencies, including the Federal Aviation Administration, the Department of Defense, and members of Congress have lobbied hard against the company.

By the numbers: JPMorgan bankers presented Ligado’s bond deal earlier this month with juicy interest payments of 13% on the highest priority notes and 16% on the more junior notes, according to an offering document reviewed by Axios.

  • But that wasn't good enough — the bank changed the terms yesterday in order to drum up more demand, according to one investor not authorized to speak publicly.
  • Ligado reduced the amount it is borrowing from $4.3 billion, and is now offering to pay a 15.5% coupon on the more senior notes and 17.5% on the junior bond, says the investor, adding the company will pay no cash interest right away.
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