Falcone Won’t Give Up on $2.4 Billion LightSquared Claim

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Billionaire investor Philip Falcone isn’t giving up control of the bankrupt wireless technology developer LightSquared Inc. without a fight.

Falcone’s Harbinger Capital Partners LLC is appealing a bankruptcy court ruling that derailed his proposal to reorganize LightSquared by canceling a $2.4 billion claim by a group of competing creditors and splitting the company in two.

When Falcone’s effort failed, creditors including Dish Network Corp. Chairman Charles Ergen reached a deal on a new Chapter 11 proposal that would give Ergen 60 percent of the equity in a reorganized LightSquared.

Harbinger, LightSquared’s current controlling shareholder, filed a notice of appeal yesterday in U.S. Bankruptcy Court in Manhattan, indicating a district court judge in New York will be asked to review the Oct. 30 decision.

LightSquared, based in Reston, Virginia, has been in bankruptcy for more than two years as the company and its lead creditors argue over the best way to reorganize. The company previously narrowed three plans to one, only to be rebuffed by the bankruptcy judge.

Joshua Sussberg, a lawyer for LightSquared, didn’t immediately return a call for comment on Falcone’s appeal bid.

Daylong Mediation

The new Ergen-led deal, which also gives equity to lender JPMorgan Chase & Co., was the result of all-day mediation on Oct. 31 with a federal judge in Manhattan, U.S. Bankruptcy Judge Shelley Chapman said at a Nov. 3 hearing.

Sussberg had told Chapman that details of the Ergen-led plan would be revealed at a hearing scheduled for today. The hearing was canceled and a new date hasn’t been set, according to the court docket.

David Friedman, a lawyer for Harbinger, told Chapman at the earlier hearing that the competing proposal “made a mockery” of the court process, because Ergen had previously testified he had no interest in controlling LightSquared.

Under the new proposal, Ergen would also be underpaying for control of the company because his equity would be worth more than the $1 billion he invested, Friedman told Chapman.

Ergen had previously proposed bidding for LightSquared’s airwaves as part of a reorganization, only to drop out at the last minute. The company accused him of secretly snapping up its debt to hijack the reorganization.

Accusations Fly

LightSquared accused Ergen of trying to destroy the company when he invested in its debt, saying evidence showed that he intended to benefit Dish. Ergen’s investment fund argued that Falcone sought to enrich himself through his proposed plans at the expense of other investors.

LightSquared sought bankruptcy protection in 2012 after the Federal Communications Commission blocked its service, saying it might interfere with GPS 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).