LightSquared Lawyer Says Lenders Settle on Exclusivity

LightSquared Inc. won permission to remain in control of its bankruptcy through July 15 after reaching a deal with lenders in a dispute over the matter.

U.S. Bankruptcy Judge Shelley Chapman filed an order today in Manhattan, New York allowing the company to enter into the deal regarding its exclusivity period, during which it alone can submit a restructuring plan. The plan must have lenders’ consent or pay them in full, Matthew Barr, a lawyer for LightSquared, Harbinger Capital Partners LLC’s broadband startup, said in court.

“I very much appreciate all of your hard work,” Chapman told the lawyers before submitting her order.

Attorneys for the lenders argued that Philip Falcone’s Harbinger wasn’t making progress on developing a plan and was keeping the company in bankruptcy for its own benefit. A hearing on the dispute began on Jan. 31 and was postponed several times to allow for settlement discussions.

LightSquared, a fledgling Reston, Virginia-based firm that sought to establish a high-speed wireless network, filed for bankruptcy protection in May after failing to win regulatory approval of its system.

‘Faulty’ Loan

Harbinger, Falcone’s New York-based hedge fund, had invested about $3 billion in LightSquared and owned about 74 percent of it as of Jan. 27.

The lenders, owning $1.08 billion of secured debt in affiliate LightSquared LP, also alleged that Harbinger misused its control of the wireless-communications company. The group asked the court for permission to sue Harbinger over an allegedly faulty $263.8 million loan that they contend should be characterized as an equity investment by the hedge-fund firm.

Harbinger contended that the company may be worth $7 billion to $12 billion, far in excess of its liabilities. Lawyers for the lenders said those values are overstated because the company hasn’t received Federal Communications Commission approval for its system.

LightSquared filed for bankruptcy protection in May, listing assets of $4.48 billion and liabilities totaling $2.29 billion. The company said it spent $4 billion developing a satellite system that it couldn’t implement for lack of FCC approval.

Harbinger acquired LightSquared in March 2010 for $1.05 billion in cash.

The bankruptcy case is In re LightSquared Inc., 12-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in Manhattan at csmythe1@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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