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.
Messrs. Ergen and Falcone didn't immediately respond to requests
for comment.
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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