LightSquared to Send Fortress, JPMorgan Plan to Creditors

Philip Falcone’s LightSquared Inc. will send a bankruptcy plan supported by Fortress Investment Group LLC (FIG), JPMorgan Chase & Co. and Melody Capital Advisors LLC to creditors to vote, LightSquared lawyer Matthew Barr said.

The standalone plan will compete with two others, one of which calls for selling most of the satellite-broadband provder’s assets to an entity owned by Charlie Ergen, chairman of LightSquared rival Dish Network Corp. (DISH)

U.S. Bankruptcy Judge Shelley Chapman in Manhattan today allowed LightSquared to go forward with the new plan after a conference with parties in chambers. She at first questioned the company’s change in course, led by a special board committee, after it previously backed an asset auction.

“The entirety of the plan changed,” Chapman said.

The standalone plan would include a $2.5 billion exit loan and at least $1.25 billion in new equity contributions, according to court papers filed Dec. 24.

LightSquared’s prior plan rested on an auction for its main wireless-spectrum assets, led by a $2.22 billion cash bid from Ergen’s entity that was valued at $3.5 billion in total. Falcone and Ergen have battled for control of LightSquared and Falcone’s investment firm, Harbinger Capital Partners LLC, is suing Ergen over the way he bought debt in the bankrupt company.

Court hearings to evaluate the competing plans will begin Jan. 9, Barr told Chapman today.

Ergen Fund

A ad hoc group of lenders that own most of LightSquared’s debt objected to the new plan. The group includes SP Special Opportunities LLC, an Ergen-owned fund with $824.3 million of LightSquared debt, according to court papers filed in July. Harbinger and LightSquared say in lawsuits that Ergen shouldn’t have been able to buy the debt because his two companies, Dish and EchoStar Corp. (SATS), are direct competitors of LightSquared.

LightSquared “would have the court and the parties disregard everything that has happened over the past year-and-a-half” by avoiding Ergen’s bid, the lenders said in a court filing. They described the new plan as “a classic bait-and-switch at the eleventh hour” that came after LightSquared delayed deadlines set under Ergen’s bid.

The new plan depends on regulatory approvals, as well as “billions of dollars of financing” that LightSquared has admitted it doesn’t yet have, according to the lenders. The lenders would have $285 million more of debt if LightSquared can’t implement the plan, they said.

Secured Lenders

U.S. Bank NA and Mast Capital Management LLC, which have proposed the third competing plan, also objected. They said LightSquared’s new proposal is intended to delay its reorganization to benefit equity holders at the expense of secured lenders like themselves.

Harbinger invested about $3 billion in Reston, Virginia-based LightSquared, which listed assets of $4.48 billion and debt of $2.29 billion in its Chapter 11 filing. Harbinger, which previously planned to submit a fourth alternative to creditors, said today it will instead back LightSquared’s plan.

U.S. Bank and Mast said they weren’t given enough time to fully evaluate the new plan, and how its financing will be repaid if the Federal Communications Commission fails to modify LightSquared’s spectrum license.

The company filed for bankruptcy last year after the FCC blocked its initial proposal to use wireless spectrum, concluding it would interfere with GPS navigation gear.

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

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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