Harbinger Argues LightSquared Lenders Can’t Sue Over Loan

Harbinger Capital Partners LLC told a bankruptcy judge that it shouldn’t be sued by holders of debt in a LightSquared Inc. unit over an allegedly faulty $263.8 million loan.

A group of lenders owning $1.08 billion of secured debt in LightSquared LP alleged that Harbinger misused its control of the wireless-communications company, which is under bankruptcy protection in Manhattan. A lawyer for Harbinger told U.S. Bankruptcy Judge Shelley Chapman today that the lenders probably will be repaid and don’t have standing to sue.

“These claims may be entirely unnecessary,” Richard Slack, the Harbinger lawyer, said during the hearing. The company has “a lot of value,” he said, adding that LightSquared’s spectrum may be worth as much as $7 billion to $12 billion, far more than the company’s liabilities.

The LP lenders say Philip Falcone’s Harbinger allowed LightSquared to take out the $263.8 million loan when it wasn’t in a financial position to borrow. The July 2011 loan should be re-characterized as an equity investment by Harbinger, which contributed $183.8 million of the total, the lenders said in court papers.

A lawyer for the lenders group, Glenn Kurtz, said today that Harbinger’s valuations of LightSquared’s spectrum “are wildly overstated,” because the company hasn’t yet received U.S. Federal Communications Commission approval for its system.

Chapman declined to rule on the matter today.

LightSquared filed for bankruptcy protection in May, listing assets of $4.48 billion and liabilities totaling $2.29 billion. The company says it spent $4 billion developing a satellite system that it couldn’t implement for lack of FCC approval.

Harbinger acquired LightSquared in March 2010 for $1.05 billion cash.

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

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