By Joseph Checkler and Tom Corrigan 

A judge on Thursday approved the restructuring plan of LightSquared, capping a bankruptcy odyssey for Philip Falcone's ambitious wireless venture that filed for bankruptcy nearly three years ago.

U.S. Bankruptcy Judge Shelley C. Chapman signed off on the plan, which pays off top lender Charlie Ergen in cash and puts LightSquared in the hands of investors including Fortress Investment Group LLC and Centerbridge Partners LP, saying it was fair to creditors.

The judge's approval signals the end of the bankruptcy battle between Mr. Ergen, Dish Network Corp.'s chairman, and Mr. Falcone, the founder of hedge fund Harbinger Capital Partners, over LightSquared and its wireless spectrum, the limited pockets of airwaves that mobile-phone and Internet companies use.

LightSquared Chief Executive Doug Smith, in an email to The Wall Street Journal, called the approval of the bankruptcy-exit plan a "new day" for the company and its employees.

"This has been a long journey, and today's ruling will allow us to emerge from Chapter 11 well-capitalized and better positioned to achieve our goals," Mr. Smith said.

The approved restructuring plan is the latest in a dizzying array of proposals, a dozen by the judge's count, most of which were scrapped by the company. Another was rejected by Judge Chapman last May for being unfair to Mr. Ergen, who amassed a pile of LightSquared's bank debt and at one point tried to buy the company.

That bid was eventually dropped, and Mr. Ergen demanded cash for his more than $1 billion in debt. When LightSquared finally relented to that demand last week, Mr. Ergen threw his support behind the proposal.

Solus Alternative Asset Management LP and Cerberus Capital Management LP, which had presented a rival restructuring plan, dropped their opposition to the LightSquared plan after LightSquared agreed to buy back their preferred stock and debt. Resolving the objections will cost LightSquared about $15 million in fees and expenses, a lawyer for LightSquared said at the hearing.

Former LightSquared CEO Sanjiv Ahuja was left as the sole objector to the plan. Judge Chapman overruled his objection, calling it "ironic and baseless." Mr. Ahuja still will recover $750,000, as part of an earlier settlement.

The money to pay off Mr. Ergen will come from a $1.52 billion new loan arranged by Jefferies & Co., which had offered financing in other LightSquared proposals throughout the case.

When the plan goes into effect, LightSquared will be owned by investors including Centerbridge, Fortress and a unit of J.P. Morgan Chase & Co. Mr. Falcone and his Harbinger Capital will keep more than 44% of the equity, although Harbinger won't have a say in day-to-day operations.

But the reorganized LightSquared won't include Dish and Mr. Ergen, who have amassed a vast pile of valuable wireless spectrum assets in recent years. In January, Dish entities outbid wireless market leader Verizon Communications Inc. for licenses in New York, Chicago and Boston at the government's record-setting wireless auction, which brought in $45 billion.

Getting Mr. Ergen out of its capital structure has long been a goal of LightSquared, ever since he abandoned his 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 he will get it, even as a group of investors that own the same type of bank debt owned by Mr. Ergen get new second-lien notes.

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.

A wireless venture that Mr. Falcone has hoped could someday provide low-cost mobile services to hundreds of millions of Americans, LightSquared isn't able to fully use spectrum that it owns without support from the Federal Communications Commission. The FCC hasn't granted the approvals necessary for LightSquared to use its network.

What happens next for LightSquared is unclear. The company will need to wait for various basic regulatory approvals just to get out of Chapter 11, and then seek the approvals that will allow it to use the network. But for now, the company at least has the financial security to continue operating while it waits.

Write to Joseph Checkler at joseph.checkler@wsj.com

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