By Dow Jones Business News, October 09, 2013, 01:50:00 PM EDT
By Joseph Checkler
NEW YORK--A bankruptcy judge on Wednesday said creditors can begin voting on the various plans to auction or
reorganize beleaguered satellite company LightSquared Inc.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan commended LightSquared's main lawyer for clearing up
what could have been a muddled hearing, with various proposals potentially up for debate. Instead, the company reported
settlements on the various objections, and the judge said she'd let creditors decide on the plans.
Milbank, Tweed, Hadley & McCloy LLP's Matthew S. Barr, the LightSquared lawyer, said the company reached deals with
current owner Harbinger Capital Partners, as well as suitor Dish Network Corp. ( DISH ), on compromised versions of four
separate plan outlines. The outlines, called disclosure statements, had to be approved by Judge Chapman before creditors
could begin voting on the restructuring plans they describe.
Harbinger, a hedge-fund company controlled by Philip Falcone, has proposed a plan that would see the company wait for
Federal Communications Commission approval of its network instead of selling itself, saying the company could be worth $
5.7 billion. Meanwhile, an investment vehicle controlled by Dish Chairman Charlie Ergen is backing a plan based on
Dish's $2.2 billion bid for some of LightSquared's wireless spectrum. A third plan from U.S. Bancorp ( USB ) and Mast
Capital Management is based on the auction of a smaller swath of spectrum for which they would serve as lead bidders.
LightSquared itself has filed a plan that calls for auctions of all or some of its assets, depending on what bidders
At Wednesday's hearing, Judge Chapman approved disclosure statements for all of the plans, leaving the ultimate choice
on the dueling plans to LightSquared's creditors.
The auctions would take place in late November, and LightSquared has said it's trying to find another bidder to
challenge the Dish offer. The company has also said it would prefer FCC approval of its network and no asset sale, but
that it must explore the sale in the event the FCC approval doesn't happen or gets delayed. The government shutdown has
hampered the FCC, making quick approval of LightSquared's network even less likely.
Mr. Ergen's bid would pay off a group of hedge funds and other investors that own more than $1.7 billion in
LightSquared bank debt. An investment entity controlled by Mr. Ergen, SP Special Opportunities, bought up more than $1
billion in that debt during LightSquared's bankruptcy. Harbinger is suing over those purchases, saying SP is a Dish
entity that should have been prohibited from acquiring the debt. Mr. Ergen is asking Judge Chapman to toss the suit,
saying he controls the entity that bought the debt and isn't subject to the same restrictions as Dish.
Judge Chapman on Wednesday also granted LightSquared's request to halt for 60 days another Harbinger lawsuit, one
filed against Global Positioning System device-makers and industry groups, so the company can focus on its bankruptcy
case and take more time to decide whether to join Harbinger in that fight.
LightSquared filed for bankruptcy protection in May 2012 after the U.S. government said the company's network could
interfere with global-positioning systems, causing the FCC to revoke LightSquared's license to use the wireless
That wireless spectrum remains valuable, and Mr. Falcone has been committed to building a nationwide, high-speed
network for years with the goal of offering cheap cellphone and wireless service. The FCC has done further testing of
LightSquared's network and currently is considering whether to approve the company's application to share some of the
government's spectrum and modify its licenses.
Mr. Falcone's legal woes have further complicated his efforts to keep control of the company. The SEC last year
charged him with, among other things, taking a $113 million loan from a Harbinger fund to pay his personal taxes as
other investors were prevented from withdrawing money.
After his initial settlement with the SEC was deemed too lenient, the two sides this past summer reached a new deal
that called for Mr. Falcone to pay about $18 million in financial penalties and agree to a five-year ban from the
securities industry. Mr. Falcone also admitted wrongdoing, a first-time occurrence in SEC settlements not related to
people who had previously pleaded guilty in a criminal proceeding or been criminally convicted. Despite the ban, Mr.
Falcone is still allowed to stay involved with LightSquared.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Joseph Checkler at email@example.com.
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