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Lightsquared Lenders Shouldn’t Get Challenge, Owners Say

A group of LightSquared Inc.’s lenders shouldn’t be allowed to challenge a pre-bankruptcy loan to the wireless company because it can’t show that hedge fund Harbinger Capital Partners LLC controlled the loan, Harbinger said in an objection filed in Manhattan bankruptcy court today.

A group of lenders that own $1.1 billion in debt at the company’s “LP” unit seek court permission to prosecute or settle claims over a $263.8 million loan the company got before its bankruptcy. They shouldn’t be granted legal standing as they have no factual support to show that pre-bankruptcy loans were made among insiders, lawyers for Harbinger said in court papers filed in Manhattan bankruptcy court today.

The bankrupt maker of wireless broadband technology backed by Harbinger has been in dispute with the so-called Ad Hoc Group since the outset of its Chapter 11 case. The Ad Hoc Group includes Capital Research & Management Co., Appaloosa Management LP and Fortress Investment Group LLC.

“The Ad Hoc Group attempts to paint the Inc. Loan as an insider transaction and even states, without any factual support, that “Harbinger controlled the ‘lending’ group,” lawyers for Harbinger wrote.

Controlled by Falcone

Harbinger, a hedge fund controlled by Philip Falcone, controls LightSquared’s board and owns 96 percent of the company’s voting stock, lenders said in their request to bring claims. The loan was made among Harbinger, which contributed $150 million, Blue Line DZN Corp., a Harbinger affiliate, which contributed $33.75 million, and UBS, which contributed $80 million, the lender group said.

U.S. Bank National Association, which took on the credit agreement from UBS, also objected to the ad-hoc groups’ request to bring claims, saying the group wouldn’t share any recoveries with other creditors.

Harbinger also said in its objection that the ad hoc group’s expenses in the bankruptcy case are now higher than those of the company, citing a $3.16 million fee for restructuring counsel compared to $3.11 million for the company.

LightSquared, based in Reston, Virginia, filed for bankruptcy in May listing assets of $4.48 billion and debt of $2.29 billion. Harbinger acquired LightSquared in March 2010 for $1.05 billion in cash and controls 96 percent of its stock.

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

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