LightSquared’s Bankruptcy Plan May Lack 2014 FCC Approval

LightSquared Inc.’s plan to exit from bankruptcy may not be approved by the Federal Communications Commission by the end of the year, the agency said in a court filing.

The FCC said in a Jan. 17 filing that it’s not in a position to confirm whether it will be able to complete the work required to approve the plan by Dec. 31. LightSquared, controlled by Philip Falcone’s Harbinger Capital Partners LLC, is seeking to exit bankruptcy through a plan supported by Fortress Investment Group LLC, JPMorgan Chase & Co. and Melody Capital Advisors LLC.

The FCC also said it plans to issue a notice of proposed rulemaking to address the use of wireless spectrum by another federal stakeholder, a development that a Wells Fargo analyst, Marci Ryvicker, said amounts to “cold water” being thrown on the Fortress-supported plan, as it might take more than a year.

“We don’t see how the latest Fortress proposal gets done with this new development,” Ryvicker said today in a note. Falcone said in court the day before the filing that he suspected the FCC would give approval this year.

LightSquared, based in Reston, Virginia, sought to establish a high-speed wireless network.

The company filed for bankruptcy in May 2012 after the FCC blocked its initial proposal to use wireless spectrum, saying it might interfere with global-positioning system navigation equipment.

Ergen Plan

Dish Network Corp. Chairman Charlie Ergen backed an alternative plan proposed by a group of lenders. In a filing Jan. 16, an entity affiliated with Ergen said it no longer wanted to be included in that plan.

Ergen is facing claims in a trial before U.S. Bankruptcy Judge Shelley Chapman that he secretly amassed debt in a bid to acquire control of LightSquared’s spectrum for Dish. Ergen contends he bought the debt as a personal investment.

Ryvicker, who has an overweight rating on Dish shares, said the latest developments in the case give Ergen the “upper hand.”

“Recall that Charlie’s proposal (which he recently walked away from) does not have any of the required exit conditions that were specified in the Fortress plan,” Ryvicker said. “We ultimately believe Charlie will end up with the LightSquared assets -- how this actually happens the big unknown.”

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

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