Centerbridge Partners LP, a New York-based private-equity firm, is teaming up with Phil Falcone’s Harbinger Capital Partners and Fortress Investment Group LLC to acquire LightSquared Inc. for $3.3 billion, according to a person familiar with matter.
The offer price doesn’t include about $1.7 billion in loans and liabilities, according to the person, who asked not to be identified because the plan is private. The takeover of LightSquared, a bankrupt wireless-network provider, is contingent on a review by the U.S. Federal Communications Commission and other conditions, the person said.
LightSquared, backed by Harbinger, had been seeking to reorganize by selling most of its spectrum assets in an auction. Billionaire Charlie Ergen was the lead bidder for the airwaves, with a $2.22 billion offer. The auction, scheduled for yesterday, was canceled, LightSquared said in a court filing.
“It would be really fascinating to know what Centerbridge heard from the FCC that gave them enough comfort to finalize a $3.3 billion bid,” said Tim Farrar, an analyst with TMF Associates Inc. in Menlo Park, California.
The ad hoc lenders group, which includes the investment vehicle of Ergen, who privately acquired about $1 billion in LightSquared debt, had proposed the reorganization plan with Dish Network Corp. as the stalking horse bidder.
“LightSquared is pursuing and negotiating an alternative transaction, supported by the significant stakeholders in the Chapter 11 case, other than the ad hoc secured group, that would be implemented through the debtors’ Chapter 11 plan,” according to the company’s filing yesterday in U.S. Bankruptcy Court in Manhattan.
LightSquared has been in dispute with the ad hoc lenders group since the beginning of its Chapter 11 case. Lawyers for Ergen said last month that LightSquared had no intention of giving the Dish bid a “fair shake” in its sale process.
On Dec. 10, Ergen lost an attempt to end a lawsuit alleging he acted improperly in buying debt of LightSquared. He also has offered to buy the entire company to complement his satellite companies Dish and EchoStar Corp.
LightSquared and Harbinger allege that Ergen formed a “secret special purpose vehicle,” SP Special Opportunities LLC, to make the debt purchases because he knew they were improper given that Dish and EchoStar compete with LightSquared. A clause in LightSquared’s credit agreement bars rivals from owning its debt.
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.
The proposal would allow Falcone to hang on to his dream of building a wireless broadband network, after the hedge-fund manager in August was banned for five years from the securities industry by the U.S. Securities and Exchange Commission.
Falcone, in an $18 million settlement of allegations that he improperly borrowed money from his funds to pay his personal income taxes, agreed to meet investor redemptions under the supervision of an independent monitor. The accord allowed Falcone to continue in his role as chief executive officer of Harbinger Group Inc. as well as LightSquared.
Harbinger Group filed documents with the SEC that would permit Falcone’s hedge funds to sell their stake in the publicly traded holding company, valued at about $905 million. Falcone had previously said he planned to move away from hedge-fund investing, where clients can pull out their money at regular intervals, and instead use Harbinger Group to finance long-term investments.
Harbinger Group, based in New York, filed to register 105.2 million shares held by existing investors, including 80.5 million shares owned by Falcone’s Harbinger Capital Partners and its affiliates. Registration of the shares allows the investors to sell the stock on the open market, though they are not required to do so.
Harbinger shares fell less than 1 percent to $11.21 at 10:26 a.m. in New York. Fortress was little changed at $8.43, while Dish fell 1.1 percent to $53.19.
Falcone declined to comment on the Centerbridge bid, as did Bob Toevs, a spokesman for Dish Networks, where Ergen serves as chairman. Centerbridge’s general counsel, Susanne Clark, also declined to comment.
The Centerbridge deal was previously reported by the Wall Street Journal.
The bankruptcy case is In re LightSquared Inc., 12-bk-12080, and Harbinger’s lawsuit is Harbinger Capital Partners LLC v. SP Special Opportunities LLC, 13-01390, U.S. Bankruptcy Court, Southern District of New York (Manhattan).