LightSquared Proposes Outline for Reorganization

Philip Falcone’s LightSquared Inc. proposed a reorganization that includes a potential sale of wireless spectrum instead of an auction led with a $2.2 billion bid from a unit of Charlie Ergen’s Dish Network Corp.

LightSquared filed the plan outline today in U.S. Bankruptcy Court in Manhattan and said it will continue to seek approval from the Federal Communications Commission to use its airwaves. The company said it also will weigh a sale of the assets and didn’t identify any potential bidders.

LightSquared’s proposal before the FCC “represents the best, immediate option to use this spectrum for mobile broadband,” Chief Executive Officer Doug Smith said in an e-mailed statement today. “While we hope the FCC does act quickly, if it does not, the unfortunate outcome will be that this opportunity to unlock this spectrum will disappear.”

The regulator is taking comments through Sept. 23 on LightSquared’s proposal. The FCC filed court papers today saying that it is the responsibility of two of the company’s units -- LightSquared Subsidiary LLC and One Dot Six Corp. -- or any buyer to comply with all of its rules and regulations.

Earlier today, LightSquared filed a general outline of how creditors should evaluate competing plans for the company. One plan, already filed by a group of lenders to its LP unit, proposes an auction with the Dish unit as lead bidder.

FCC Decision

LightSquared filed for bankruptcy protection last year after the FCC blocked its initial proposal to use the spectrum, concluding it would interfere with navigation gear that uses the global positioning system. LightSquared in September revised its plan to avoid interference by using other airwaves..

Yesterday, LightSquared’s lender group said the company shouldn’t be allowed to run its own bankruptcy auction, citing depleted cash, a changing industry and a controlling shareholder who wants to block the sale.

The lenders, a trustee or an independent committee should conduct the planned asset auction, the lenders said. Since the Chapter 11 case began, LightSquared’s cash has dwindled by $125 million to about $61 million, Steve Zelin of financial adviser Blackstone Group LP said in support of the lenders.

A lawsuit filed by Falcone’s investment company, Harbinger Capital Partners LLC, against Ergen and Dish shows Falcone wants to keep control of LightSquared, Zelin said.

The lender group, which owns debt in the LP unit, includes Capital Research & Management Co., Fir Tree Capital Opportunity Master Funds LP, Cyrus Capital Partners LP, Intermarket Corp., UBS AG and SP Special Opportunities LLC, a fund owned by Ergen.

LightSquared, based in Reston, Virginia, filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion.

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

Before it's here, it's on the Bloomberg Terminal.