By Joseph Checkler
NEW YORK--LightSquared filed a restructuring plan Tuesday that
would give Charlie Ergen what he has said he wants in the wireless
spectrum company's Chapter 11 case--all cash for the roughly $1
billion he is owed.
In an amended reorganization proposal filed just before midnight
with U.S. Bankruptcy Court in Manhattan, the mobile satellite
company said it would pay off the Dish Network Corp. chairman, the
company's largest creditor, in all cash rather than a combination
of cash and a five-year note. The money would come from a $1.52
billion new loan provided by Jefferies & Co., which had offered
financing in other LightSquared proposals throughout the case, all
of which fell through.
The new plan, which is expected to be discussed in court later
Wednesday as LightSquared continues pushing to get a reorganization
plan approved, was filed after hedge-fund managers Solus
Alternative Asset Management LP and Cerberus Capital Management LP
announced a rival proposal that would pay most but not all of Mr.
Ergen's claim in cash.
Mr. Ergen supports that proposal, which would pump more new
money into the company than LightSquared's own plan. As of late
Wednesday morning, it was unclear what Mr. Ergen thinks of the new
LightSquared plan. A spokesman for Mr. Ergen and Dish didn't
immediately respond to a request for comment.
The altered LightSquared plan, which would still put the company
in the hands of investors including Centerbridge Partners LP,
Fortress Investment Group LLC, and a unit of J.P. Morgan Chase
& Co., would allow current LightSquared owner Philip Falcone
and his Harbinger Capital Partners to keep more than 44% of the
equity. Harbinger, which would get to pick one board member under
the hedge funds' plan, wouldn't under the Centerbridge and Fortress
proposal. Mr. Falcone and other Harbinger officials have already
resigned from the board, and don't take part in the company's
decisions.
Getting Mr. Ergen out of its capital structure has long been a
goal of LightSquared, ever since he abandoned a bid to buy the
company's valuable spectrum assets early last year. Mr. Ergen has
consistently said he wants cash for the money he is owed, which is
more than $1.4 billion including interest. Now, it appears he may
get it, even as a group of investors that own the same type of bank
debt owned by Mr. Ergen would get new second-lien notes. Mr.
Ergen's lawyers are likely to weigh in on the new LightSquared plan
later at Wednesday's hearing, in which James E. Millstein, head of
a financial advisory firm, was testifying. Mr. Millstein's
testimony quickly became an undercard, with lawyers and Judge
Shelley C. Chapman waiting for the main event, discussion of the
new plan.
LightSquared filed for Chapter 11 in May 2012, shortly after
federal regulators refused to clear LightSquared's plans to launch
its wireless network. Those regulators heeded warnings from the GPS
industry that the network could interfere with GPS.
LightSquared isn't able to fully use spectrum that it owns
without support from the Federal Communications Commission . The
FCC so far has refused to grant such approval.
The company has gone through several proposed restructuring
plans, some including Mr. Ergen and some not, but all have fallen
through. Judge Chapman earlier this year urged the parties to reach
a deal supported by all creditors, including Mr. Ergen. As of late
Wednesday morning, it was unclear if and when the judge may decide
whether to approve this restructuring.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@wsj.com
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