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LightSquared Seeks Approval of New Plan With Fortress Bid

Harbinger Group CEO Philip Falcone
Philip Falcone, chairman and chief executive officer of Harbinger Group Inc. Photographer: Jacob Kepler/Bloomberg

Philip Falcone’s LightSquared Inc. seeks court approval for a new bankruptcy plan that would include a reorganization supported by Fortress Investment Group LLC, JPMorgan Chase & Co. and Melody Capital Advisors LLC.

The standalone plan would avoid a sale to an entity owned by Charlie Ergen, chairman of LightSquared rival Dish Network Corp. It would include a $2.5 billion exit loan and at least $1.25 billion in new equity contributions, according to papers filed Dec. 24 in U.S. Bankruptcy Court in Manhattan.

LightSquared’s prior plan rested on an auction led by a $2.22 billion bid from Ergen’s entity. Falcone and Ergen have been battling for control of the satellite broadband provider and Falcone’s investment firm, Harbinger Capital Partners LLC, sued Ergen over the way he bought debt in the bankrupt company.

LightSquared has refused to meet with Ergen and consider his offer, lawyers for Ergen have said. LightSquared said a special committee of its board pursued alternative transactions so it could maximize value for all the company’s stakeholders.

“Whether it has been in connection with a sale process or separate discussions regarding a standalone reorganization, the special committee has explored and evaluated all value-maximizing possibilities,” lawyers for LightSquared wrote. “These efforts have been productive.”

FCC Approval

The new plan will be conditioned on approval by the Federal Communications Commission of LightSquared’s application to modify the license for its spectrum. 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.

LightSquared seeks a hearing Dec. 30 to win court approval of the new plan before sending it to creditors to vote.

A group of lenders that includes an Ergen-owned fund said Dec. 19 that all other offers to pay for a reorganization had “vaporized.” LightSquared also failed to make any progress on regulatory issues or raise enough financing for a standalone plan in the past 20 months, while the lenders bore all of the company’s risks, they said in court papers.

That group, which once included Fortress, has shifted during LightSquared’s bankruptcy as new parties have bought the company’s debt.

Ergen Fund

One buyer was SP Special Opportunities LLC, a fund owned by Ergen, which held $824.3 million of LightSquared debt, according to court papers filed in July. Members also included Capital Research & Management Co., with $331.2 million of the debt, and Cyrus Capital Partners LP, with $134.5 million worth.

Harbinger and LightSquared sued Ergen over the way SP bought the debt before making an offer for the wireless company’s assets. They said that Ergen shouldn’t have been able to make the purchases because his two companies, Dish and EchoStar Corp., are direct competitors of LightSquared.

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.

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

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