Falcone’s Harbinger Capital Files New LightSquared Plan

Philip Falcone’s LightSquared Inc., the bankrupt wireless company, is again the subject of competing plans over how to reorganize its business, with a potential hearing in October to confirm a final plan, a judge said.

U.S. Bankruptcy Judge Shelley Chapman said in Manhattan court today that she would consider a date around Oct. 20 to weigh arguments over how to reorganize the company, which previously narrowed three plans down to one, only to see it fail to win court approval.

Chapman said she may have to “pick between or among two or three confirmable plans” after Falcone’s investment firm, Harbinger Capital Partners LLC, filed a new plan today, four days after LightSquared filed its own.

Mast Capital Management LLC has said it may put forth its own proposal, which would split up the company and separately reorganize debt at the “Inc.” and “LP” divisions, which have different lenders and own different rights to wireless spectrum.

Last year, the company faced three competing plans, one from Mast and U.S. Bank NA to reorganize the Inc. assets; one from Fortress Investment Group LLC, JPMorgan Chase & Co. and Melody Capital Advisors LLC that would reorganize the company as a standalone business; and one backed by lenders to the LP unit that would sell those assets to a buyer owned by Dish Network Corp. Chairman Charles Ergen.

Bid Dropped

Ergen dropped his bid and the company went forward with the standalone plan, only to see it scuttled after a dispute broke out between LightSquared and Ergen over how his $1 billion in debt would be treated. Falcone left the board of LightSquared in June, amid negotiations to reach a new agreement.

Chapman said today that she would consider further mediation and would contact U.S. Bankruptcy Judge Robert Drain, who was assigned to mediate the earlier creditor dispute.

“People should keep talking to one another,” she said. “I don’t have a whole lot of hope. I’m willing to try just about anything to move things forward.”

Harbinger’s plan to reorganize the company, filed today, would rely on $460 million in financing to fund operations in bankruptcy, $360 million of which would be converted into exit financing. It would also entail $100 million in revolving exit financing, according to court papers.

Separately today, a special committee of LightSquared’s board said it expected junior stakeholders, including Harbinger, to object to its plan, which it said offers the best recoveries by keeping the company’s two branches with its main wireless assets together.

“LightSquared and the special committee have given the junior stakeholders every possible opportunity to gain consensus and finance their own recovery. It simply has not happened,” lawyers for the special committee wrote.

Mast Debt

Mast said in an Aug. 9 letter to Chapman that it won’t vote for LightSquared’s plan because of the way it treats Mast’s debt in the Inc. unit.

The Ergen-controlled fund that owns about $1 billion in the LP unit’s debt said in a letter to Chapman today that it doesn’t believe the company’s current plan can be confirmed.

During LightSquared’s attempt to negotiate a prior plan, Falcone accused Ergen of accumulating the debt in secret and trying to hijack the reorganization. Harbinger Capital fought to send Ergen to the back of the line of creditors to be repaid.

The investment fund sued Ergen and Englewood, Colorado-based Dish, accusing them of using “improper tactics” in trying to obtain LightSquared’s airwaves.

LightSquared, based in Reston, Virginia, sought bankruptcy protection in 2012 after the Federal Communications Commission blocked its service, saying it might interfere with global positioning system navigation equipment. LightSquared still hasn’t obtained U.S. regulatory approval to use its airwaves.

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

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