Ergen to be in on LightSquared bankruptcy loan: court filing

Reuters News
Posted: Feb 03, 2014 6:10 PM

By Billy Cheung and Nick Brown

New York (Reuters) - An investment vehicle owned by Dish Network Corp Chairman Charles Ergen is joining an existing lender group to extend $33 million in financing to bankrupt wireless company LightSquared, court filings show.

LightSquared's equity owner, Phil Falcone's Harbinger Capital Partners, is fighting to keep control of the company in a messy bankruptcy. Ergen's investment vehicle has bought up much of LightSquared's debt, while Dish offered and later withdrew a $2.2 billion offer to purchase the company's spectrum, an offer Harbinger did not accept.

LightSquared, which could run out of cash by March, needs a debtor-in-possession financing loan to keep operating while in bankruptcy, at least through the end of the first quarter. It has said it expects its restructuring efforts to extend into March.

A court hearing to approve the proposed loan is slated for Tuesday.

LightSquared, which wants to build a massive wireless network, filed for bankruptcy protection in May of 2012 after the Federal Communications Commission revoked its spectrum license. The FCC cited concerns that the proposed network could interfere with GPS systems.

Last month, LightSquared received three separate bankruptcy loan proposals. One was from a subset of its largest lender group, one from the Ergen entity, and one from Fortress Investment Group. Last week, Fortress joined the lender group, leaving Ergen's as the sole competing offer.

The Ergen vehicle is LightSquared's largest single creditor, having bought up chunks of debt throughout 2012 and 2013. Monday's filing includes him in the loan, which already featured financing from Aurelius Capital Management, Cyrus Capital Partners, Solus Alternative Asset Management, Fortress and others.

While cooperation between Ergen and LightSquared has been rare throughout the bankruptcy, it may be necessary on the loan to give the sides breathing room to negotiate LightSquared's restructuring. It does not mean the sides have reached common ground about the fate of the company, and a lawsuit remains pending in which LightSquared has accused Ergen of surreptitiously buying up its debt so he could control the company's capital structure and effect a Dish takeover.

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Dish offered $2.2 billion to acquire LightSquared spectrum, an offer to which LightSquared never warmed, and which was withdrawn last month.

LightSquared is facing three separate proposals for how it should restructure, but said in a court hearing last week that it plans to engage creditors in talks toward a consensual deal.

Harbinger itself had also proposed a loan, but Monday's filing suggests the company will not take it.

Harbinger's loan would have been structured as a junior loan to avoid a fight with senior LightSquared lenders over collateral claims. Harbinger's bankruptcy claims rank below those of the secured group, and a senior loan from Harbinger would have elevated its claims above those of other lenders.

(Reporting by Billy Cheung and Nick Brown; Editing by David Gregorio)