Phil Falcone and LightSquared urged a bankruptcy judge to reject
a plan to sell the company's wireless spectrum assets to Charlie
Ergen's Dish Network Corp., a deal they say is inferior to
LightSquared's proposal to reorganize on its own.
In a Thursday filing with U.S. Bankruptcy Court in Manhattan,
LightSquared noted Dish's stock price has risen nearly 50% since it
made a bid for the spectrum assets, meaning investors think the
assets are worth much more than Dish's $2.2 billion bid.
"There is no question how the market views such assets,"
LightSquared said in its filing.
Mr. Falcone's Harbinger Capital Partners, which controls
LightSquared's equity, said in a separate filing that the Dish bid
values the assets at less than 25% of the enterprise value that
LightSquared's own reorganization plan proposes. He said the
lenders backing Dish's bid just want to be paid.
"The debtors' secured creditors, with nothing to gain from the
debtors' reorganization, continue to push for a sale liquidation to
serve their parochial and largely illegitimate purposes,"
Harbinger's lawyers said in their filing.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan
will next week consider whether to approve the proposal by those
lenders to sell the company's wireless spectrum to Dish. She'll
also be asked to approve a plan to sell a smaller part of the
spectrum to LightSquared creditors Mast Capital Management and US
Bancorp, which LightSquared also opposes.
But LightSquared will get its say later in January, when it is
expected to make the case for Judge Chapman that its $4 billion
restructuring proposal--led by Fortress Investment Group LLC--is
actually better than the Dish sale and smaller sale. After all the
hearings are done, the judge will then decide whether to approve
the LightSquared proposal or the Dish and Mast sales. Spectrum
refers to the limited pockets of airwaves that mobile phone and
Internet companies use.
LightSquared "s proposal, filed Dec. 26, is backed by Fortress,
Melody Capital Advisors LLC, J.P. Morgan Chase & Co. and
Harbinger. It includes $2.5 billion in so-called exit financing, a
$250 million loan earmarked for a reorganized LightSquared and a
Melody-led $285 million bankruptcy loan. Dish has said that its
purchase isn't contingent on obtaining the Federal Communications
Commission approvals that LightSquared needs, since it wouldn't be
using the spectrum for the same purposes.
All the plans would pay off the lender group holding nearly $2
billion in LightSquared bank debt, a group that includes hedge
funds and an investment entity wholly owned by Mr. Ergen.
LightSquared has said Mr. Ergen illegally bought that debt on
behalf of Dish, a competitor that wouldn't have been allowed to buy
it. Mr. Ergen and Dish are fighting the suit, saying those
allegations are false.
LightSquared filed for bankruptcy protection in May 2012 after
federal regulators refused to clear the company's network plans,
which they said could interfere with global-positioning
systems.
Since then, LightSquared has tried to clear up the regulatory
concerns while Mr. Falcone has fought to maintain control of the
company. The Dish bid, made last year, caused LightSquared to
eventually consider an auction of the assets, although it canceled
the auction at the last minute and soon after presented its latest
restructuring proposal. The fate of the company should be
determined by Judge Chapman's decisions over the next month.
(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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