LightSquared, Suitors Gird for Bankruptcy-Court Showdown
By Joseph Checkler
As LightSquared and its various suitors prepare to meet in court Wednesday over their competing plans to bring the company out of bankruptcy, the wireless venture said it was unable to strike a compromise with Charlie Ergen's Dish Network Corp. (DISH) on the parameters of a sale.
LightSquared is set to ask Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan to sign off on its plan to sell the company's assets under one restructuring proposal, but parties bidding on those assets disagree. Dish, which is bidding $2.2 billion for a chunk of LightSquared's wireless spectrum, wants a separate plan for that sale.
LightSquared said in court papers that it tried to come to a compromise with Dish and a third group bidding on a smaller piece of the wireless-satellite company's spectrum, to "avoid waste of estate resources, duplication of effort" and market confusion.
"Unfortunately, to date, LightSquared has been unsuccessful in its efforts," the company said.
Judge Chapman is being asked to send a restructuring plan for LightSquared to creditors for a vote, but all parties involved have different ideas of what that proposal should look like.
In addition to the more valuable spectrum that Dish is bidding for, Judge Chapman will consider whether to let creditors vote on a plan to sell a smaller amount of LightSquared spectrum, with creditors U.S. Bancorp (USB) and Mast Capital Management serving as lead bidders. It is unclear whether Judge Chapman will ask the parties to consolidate the restructuring of the company, or if they will compromise on such a proposal.
LightSquared says its plan is the only one that allows for a piece-by-piece auction of the company's assets. Currently, the auction for the larger swath of spectrum is set for late November with Mr. Ergen's bid currently the highest. LightSquared has said it is trying to find rival bidders.
A separate plan for LightSquared, filed by Phil Falcone's Harbinger Capital Partners, doesn't propose a sale at all: It calls for the company to wait for Federal Communications Commission approval of its network. If that happens, Harbinger--which owns a majority stake in LightSquared--thinks the company would be valued at $5.7 billion, more than enough to pay off its creditors. SP Special Opportunities LLC, an investment vehicle controlled by Mr. Ergen, said Harbinger's plan is an attempt to "further its own obstructive, self-interested agenda."
Mr. Falcone is suing Mr. Ergen, saying SP Special Opportunities is a Dish entity that should have been prohibited from acquiring $1 billion in LightSquared debt. Mr. Ergen asked a judge to toss the suit, saying he controls the entity that bought the debt and therefore it isn't subject to the same rules as Dish.
Representatives for Dish and Harbinger didn't immediately respond to requests for comment.
LightSquared filed for bankruptcy protection in May 2012 after the U.S. government said the company's network could interfere with global-positioning systems, causing the FCC to revoke LightSquared's license to use the wireless spectrum.
That wireless spectrum remains valuable, and Mr. Falcone has been committed to building a nationwide, high-speed network for years with the goal of offering cheap cellphone and wireless service for 260 million Americans. The FCC has done further testing of LightSquared's network and currently is considering whether to approve the company's application to share some of the government's spectrum and modify its licenses. Such an approval would allow LightSquared to deploy some of its network quickly while it waits for approval on other parts of it. The time-consuming approval process, though, has forced LightSquared to explore a sale that its creditors--chiefly a group of hedge funds owed more than $1.7 billion in bank debt--have long supported.
Mr. Falcone's legal woes have further complicated his efforts to keep control of the company. The SEC last year charged him with, among other things, taking a $113 million loan from a Harbinger fund to pay his personal taxes as other investors were prevented from withdrawing money.
After his initial settlement with the SEC was deemed too lenient, the two sides this past summer reached a new deal that called for Mr. Falcone to pay about $18 million in financial penalties and agree to a five-year ban from the securities industry. Mr. Falcone also admitted wrongdoing, a first-time occurrence in SEC settlements not related to people who had previously pleaded guilty in a criminal proceeding or been criminally convicted.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
Write to Joseph Checkler at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires 10-08-131536ET Copyright (c) 2013 Dow Jones & Company, Inc.