By Joseph Checkler
LightSquared filed a new restructuring plan that involves Philip
Falcone and his Harbinger Capital Partners hedge-fund firm, but
wouldn't give Harbinger say in the company's day-to-day
operations.
The plan, filed early Thursday morning with U.S. Bankruptcy
Court in Manhattan, includes investment firms Fortress Investment
Group LLC and Centerbridge Partners LP. The proposal marks a
dramatic reversal from the last plan LightSquared filed with the
court.
That plan would have wiped out Mr. Falcone's stake and given a
majority of the equity to Dish Network Corp. Chairman Charlie
Ergen, the wireless venture's biggest creditor.
This one would pay off Mr. Ergen, who is owed more than $1
billion through his SPSO investment vehicle, with a five-year note.
A group of investors owning LightSquared's bank debt would also be
paid off via a note.
In court Thursday, LightSquared and the bankruptcy judge
overseeing the case, Shelley C. Chapman, thanked Judge Robert Drain
for mediating the agreement. Mr. Drain wasn't present in court.
While Harbinger would be the largest shareholder of the new
LightSquared, a wireless venture whose network could someday
provide low-cost mobile services to hundreds of millions of
Americans, it wouldn't have any representation on the board of
directors. Centerbridge and Fortress would pick three of the
board's seven members. Harbinger also agreed to drop its various
lawsuits against several entities, including Mr. Ergen, the U.S.
government and the global positioning systems industry.
LightSquared will also drop its litigation against Mr. Ergen for
his purchase of the company's debt.
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.
The Wall Street Journal reported late last month that Mr.
Falcone was pursuing this new proposal, after a record auction for
U.S. wireless spectrum suggested LightSquared's spectrum could be
worth more than previously believed. Spectrum refers to the limited
pockets of airwaves that mobile-phone and Internet companies
use.
LightSquared isn't able to fully use spectrum that it owns
without support from the Federal Communications Commission. The FCC
has so far refused to grant such approval.
LightSquared said in its filing that all major creditor groups,
except Mr. Ergen's SPSO, support the new proposal.
"SPSO's pattern of conduct throughout the Chapter 11 Cases
suggests that it would not be supportive of any proposal that did
not result in SPSO obtaining ownership and control of the Debtors'
assets," LightSquared said in its filing. A Dish spokesman didn't
immediately respond to a request for comment.
Willkie Farr & Gallagher LLP's Rachel Strickland, a lawyer
for Mr. Ergen, said in court Thursday that her client preferred to
be paid in cash.
"They believe we're easier to separately classify," Ms.
Strickland said, citing the acrimony in the case between
LightSquared and Mr. Ergen.
That said, she sounded optimistic that a settlement could be
reached: "This could be done inside of a week if folks had the
desire," Ms. Strickland added.
"It represents the most recoveries for the most parties," said
Joshua A. Sussberg of Kirkland & Ellis LLP, a lawyer for the
special committee in charge of LightSquared, in court Thursday.
Under the new plan, Mr. Falcone's Harbinger would own 44.4% of
LightSquared's equity, with Fortress getting 26.2%, and
Centerbridge 8.1%. The rest of the equity would go to current
investors in a smaller piece of the company, called LightSquared
Inc.
The company also said $1.25 billion in new money would be pumped
into LightSquared as a springboard out of bankruptcy.
Meanwhile, LightSquared's case has gone through many
machinations, some involving Mr. Falcone and some not. He and other
Harbinger officials have already resigned from the company's board
of directors, and won't be on the new board.
As Mr. Falcone's grip on LightSquared loosened, he sued the
entities he felt were responsible for his $2 billion or so in
losses on the investment. Those parties include Dish, Mr. Ergen,
the U.S. government and the GPS companies that warned
LightSquared's network could interfere with GPS.
All of those parties denied wrongdoing, and the suits will be
dropped if this new plan is eventually approved by by Judge
Chapman.
Write to Joseph Checkler at joseph.checkler@wsj.com
Access Investor Kit for DISH Network Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US25470M1099
Access Investor Kit for Fortress Investment Group LLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US34958B1061
Subscribe to WSJ: http://online.wsj.com?mod=djnwires