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LightSquared Has Agreement With Lenders on Auction Proces

LightSquared Inc., Philip Falcone’s bankrupt wireless spectrum company, resolved a dispute with lenders on bidding procedures that the company had said could have foiled a $2 billion offer for its assets.

The auction procedures will be submitted for formal court approval, Matthew S. Barr, an attorney for LightSquared, told U.S. Judge Shelley Chapman in Manhattan today. Under the agreement, an independent committee will oversee the auction.

The lenders, who hold $1.4 billion of $1.7 billion in debt of LightSquared’s LP unit, had objected to a plan that it said would have given Falcone’s investment company, Harbinger Capital Partners LLC, too much power to choose the winning bid. The group said Harbinger opposed any sale of LightSquared assets.

“This playing field is as level as it gets,” Chapman said at today’s hearing. The plan sends a “message to the marketplace” that potential bidders have a chance to win the auction, the judge said.

The company is seeking to sell its wireless-spectrum assets under court protection and has a $2.22 billion offer from a unit of Charlie Ergen’s Dish Network Corp. (DISH)

LightSquared, based in Reston, Virginia, filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion. U.S. regulators blocked the service after makers and users of global positioning system devices, including the U.S. military and commercial airlines, said LightSquared’s signals would confound navigation gear.

Lawsuit Halt

The company today sought to halt a lawsuit that Harbinger brought against the GPS industry, saying the case overlaps with issues raised in the bankruptcy. LightSquared asked the court to keep the lawsuit from going forward for 60 days as it might “distract key LightSquared officers and employees from the restructuring efforts at a critical stage.”

Lenders had criticized the suit.

The case was filed in August in U.S. District Court against Deere & Co., Garmin International Inc. (GRMN), Trimble Navigation Ltd., the U.S. GPS Industry Council and the Coalition to Save Our GPS.

The defendants were accused of fraudulently failing to disclose that they had designed their GPS devices to use certain portions of LightSquared’s spectrum, “a fact that ultimately delayed approval for LightSquared’s network and led to LightSquared filing for bankruptcy,” the company said.

‘Material Misrepresentations’

LightSquared had invested about $1.9 billion to build a business based on “material misrepresentations and omissions” made by the defendants, according to the lawsuit.

Also today, a lawsuit that accused Falcone and Harbinger of misleading investors about the firm’s stake in LightSquared was narrowed by a U.S. judge.

U.S. District Judge Alison Nathan in Manhattan today dismissed all or part of seven of the nine counts in the lawsuit. She gave the plaintiffs one more chance to amend the complaint to address her rulings.

The investors claimed Harbinger acquired an interest in LightSquared, formerly known as SkyTerra Communications Inc., without adequately warning investors of the risks. Harbinger eventually owned 60 percent of LightSquared, which was developing a high-speed wireless broadband network before it filed for bankruptcy last year.

The original suit was filed in February 2012 by Lili Schad, of Wallkill, New York, who said she invested $4 million with Harbinger. Schad, who is seeking to represent a class of Harbinger investors, said she wasn’t told LightSquared’s plan to build the network faced obstacles from U.S. regulators.

The bankruptcy case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The investor case is Schad v. Harbinger Capital Partners LLC, 12-cv-01244, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in U.S. Bankruptcy Court in Brooklyn, New York, at tkary@bloomberg.net; Chris Dolmetsch in U.S. Bankruptcy court in Manhattan at cdolmetsch@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net.

To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

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