By Joseph Checkler
A judge on Tuesday said creditors can vote on LightSquared's
reorganization plan, but she urged the company to work on a new
deal that would satisfy Dish Network Corp. Chairman Charlie Ergen,
the company's largest creditor and biggest opponent of the
proposal.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan
said she'd approve the so-called disclosure statement, or plain
English version, of the wireless broadband venture's restructuring
plan on which creditors must vote, but said the company would be
better off finding more money that would pay Mr. Ergen in a way
that satisfies him. Other major creditors support the deal.
At Tuesday's hearing, Judge Chapman called the new restructuring
plan one "that neither side really wants." She also mentioned a
previous restructuring proposal presented last year, one she
rejected for being unfair to Mr. Ergen.
"Everyone should look at all available sofas, everyone should
knock on all available doors," Judge Chapman said, after talking
about finding "change in the couch." Earlier in the hearing,
LightSquared clarified some of the wording in the document to
satisfy concerns from Mr. Ergen's lawyers.
The proposal, the latest of many presented in LightSquared's
32-month-old bankruptcy case, must ultimately be approved by Judge
Chapman at a hearing currently set for March. However, the judge
was adamant that she'd prefer to decide on a plan that Mr. Ergen
supports, rather than one he will object to in a protracted,
multiday hearing.
The plan presented by LightSquared last month would put the
company in the hands of investors pumping new money into the
wireless venture, including Fortress Investment Group LLC (FIG) and
Centerbridge Partners LP. Mr. Ergen, would be repaid via a
five-year note rather than cash, unlike other creditors that own
the same type of bank debt. Mr. Ergen is the only major creditor
who doesn't support the plan.
Under the plan, current LightSquared owner Philip Falcone's
Harbinger Capital Partners would own 44.4% of the company'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.
While Harbinger would be the largest shareholder of the new
LightSquared, a wireless venture that Mr. Falcone has hoped could
someday provide low-cost mobile services to hundreds of millions of
Americans, the investment firm wouldn't have any representation on
the company's board of directors. Instead, Centerbridge and
Fortress would pick three of the board's seven members. Mr. Falcone
and Harbinger have already given up their seats on LightSquared's
board.
A key component of the plan is an agreement by Harbinger to drop
its various lawsuits against several entities, including Mr. Ergen,
the U.S. government and the global-positioning-system industry.
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.
Write to Joseph Checkler at joseph.checkler@wsj.com
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