US Justice Dept objects to LightSquared bankruptcy exit plans
NEW YORK Nov 22 (Reuters) - The U.S. Department of Justice's bankruptcy watchdog on Friday questioned the feasibility of four competing restructuring plans for bankrupt LightSquared put forth by the company and its creditors.
In a court filing in U.S. Bankruptcy Court in Manhattan, the DOJ's U.S. Trustee Program said the plans would provide third parties with overly broad releases from potential legal claims.
LightSquared, in bankruptcy since 2012, is fighting to keep control of its valuable spectrum amid a takeover push by Dish Network Corp. Three creditor groups have proposed plans that contemplate an auction for the assets, and Dish has already made a baseline bid of $2.2 billion. A fourth plan, proposed by LightSquared's majority owner, Phil Falcone's Harbinger Capital Partners, would restructure the company without an auction, with Harbinger maintaining control.
LightSquared, which had planned a massive wireless network, filed for Chapter 11 protection after the Federal Communications Commission blocked it from using its spectrum amid interference concerns from the GPS industry.
The Trustee's office said the restructuring plans could be read to protect third parties from claims related to criminal conduct and professional malpractice, even though they exclude fraud and gross negligence claims from the releases.
The Trustee's office also complained that any sale deal would need FCC clearance, which it characterized as "uncertain."
It added that Harbinger's plan "suffers from the same regulatory problem" in that it would require LightSquared to obtain the FCC clearance it previously lost to resume its operations.
The objection will be considered at a hearing on December 10 in Manhattan bankruptcy court.
The case is re LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.