A group of LightSquared Inc.’s lenders said they oppose extending Philip A. Falcone’s control of the wireless broadband venture because his strategy to revive the bankrupt company is too risky.
LightSquared has asked U.S. Bankruptcy Judge Shelley Chapman for a 150-day extension of its exclusive right to control the bankruptcy case. The lenders, who say they own about $1.1 billion of the $1.7 billion in secured debt of the company’s LP unit, objected in a filing today in Manhattan.
“Having nothing to lose, Mr. Falcone wants to pursue a high-risk, high-return strategy” of trying to get regulators to reverse their stance on LightSquared’s technology, the lenders said. They favor a “more conservative approach that would realize value through a third-party transaction or otherwise force Mr. Falcone to put his money where his mouth is,” according to the filing.
LightSquared, which is backed by billionaire Falcone’s Harbinger Capital Partners hedge fund, has the exclusive right to file its own Chapter 11 plan until Sept. 11, with a Nov. 10 deadline to solicit creditor approval, according to court papers. LightSquared has said it needs extra time because the company and its affiliates are “large and complex,” with some units located in Canada, and it faces regulatory issues over its broadband network.
LightSquared, based in Reston, Virginia, filed for bankruptcy in May with plans to try to resolve concerns of U.S. regulators who thwarted the company’s attempt to deliver high-speed wireless service to as many as 260 million people.
Separately, the lenders also objected to LightSquared’s proposed $6 million bonus plan for key executives. The plan would pay four “insiders” as much as 285 percent of their base salaries as cash bonuses if LightSquared exits bankruptcy by 2013, and at least 235 percent of their salaries regardless of how long it takes to leave court protection, according to court papers.
The executives would also get restricted stock units, paid in shares of current common stock in the company.
The bonus plan offers “little, if any, incentive to swiftly move these cases along,” while the company will probably use up $100 million in cash by the end of the first quarter of next year, the lenders said.
The case is In re LightSquared Inc., 12-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).