LightSquared creditors to vote on latest bankruptcy exit plan

Reuters News
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Posted: Jan 20, 2015 2:15 PM

By Nick Brown

NEW YORK (Reuters) - A U.S. bankruptcy judge on Tuesday gave wireless venture LightSquared the go-ahead to let creditors vote on its latest plan to exit bankruptcy, while also urging the company and creditors to seek a less contentious compromise.

Judge Shelley Chapman approved the outline of LightSquared's current plan at a hearing in U.S. Bankruptcy Court in New York, but said neither party seems happy with it.

"We're about to embark on a ... hearing on a plan that neither side really wants," Chapman said.

LightSquared and its creditors are fighting over control of the company's assets, comprised mainly of wireless spectrum, a limited and typically highly valued resource. But the value of LightSquared's spectrum remains a point of debate amid uncertainty as to whether it will receive regulatory approval, hampering its efforts to raise funds to pay creditors in cash.

The latest plan, if approved by a majority of creditors, will go before Chapman for final approval at a hearing beginning on March 9, during which objectors can be heard. In the meantime, she said, she would "be delighted" if parties would come up with a new, consensual plan.

Phil Falcone's Harbinger Capital Partners, which controls LightSquared, would keep 44 percent of its equity under the current proposal, but cede operational control. Fortress Investment Group and Centerbridge Partners, both LightSquared investors, would own 26 percent and 8 percent, respectively.

The crux of the dispute concerns LightSquared's largest creditor, Dish Network Corp Chairman Charles Ergen, who holds $1 billion of the company's loan debt. Ergen would be repaid in the form of a five-year note, but wants a cash payout.

Discord over how to treat Ergen's debt has stymied several previous restructuring plans, and is a key reason LightSquared's Chapter 11 case is nearing its third anniversary.

The company filed for bankruptcy in May of 2012 after the Federal Communications Commission revoked its spectrum license out of concern that its planned wireless network would interfere with GPS systems.

Ergen acquired his loan stake through his own investment vehicle, which LightSquared alleged was a ploy to skirt rules barring LightSquared competitors, like Dish, from owning its debt. Ergen said the investment was strictly for his personal account.

Ergen's lawyer, Rachel Strickland, has said in court that Ergen does not want to be a holder of LightSquared debt, instead preferring a cash payout.

If neither side wants him there, they should be able to find a way to pay Ergen off, Judge Chapman said at Tuesday's hearing.

"Now is the time to look around for loose change in the sofa cushions," Chapman said. "Everyone should look in all available sofas. Everyone should knock on all available doors."

(Reporting by Nick Brown; Editing by Alan Crosby)