LightSquared, creditors working on consensual restructuring

NEW YORK Fri Jan 31, 2014 4:12pm EST

NEW YORK Jan 31 (Reuters) - LightSquared Inc and its various creditors are in talks to devise a consensual plan to restructure the wireless company's assets and end its bankruptcy, the company told a judge on Friday.

LightSquared, owned by Phil Falcone's Harbinger Capital Partners, is trying to bridge disagreements among proponents of three separate reorganization proposals currently on the table, according to Paul Basta, a lawyer for a special committee overseeing the company's restructuring. The disclosure was made during a hearing in U.S. Bankruptcy Court in New York.

The talks so far do not include representatives for Dish Network Corp Chairman Charles Ergen, whose debt holdings make him LightSquared's largest single creditor. LightSquared has accused Ergen of surreptitiously buying the debt to effect a takeover of LightSquared by Dish, a key competitor. A trial on that dispute remains ongoing.

Ergen could be included in the talks down the line, Basta said. Dish last year made a $2.2 billion bid for LightSquared's valuable spectrum assets, but pulled the bid the morning the trial began earlier this month.

LOAN HEARING ADJOURNED

The company on Friday was granted a postponement until February 4 of an originally scheduled agenda item to discuss a $33 million loan to help LightSquared survive during bankruptcy. LightSquared attorney Matthew Barr said the final terms of the so-called debtor-in-possession loan have not been reached.

LightSquared needs proceeds from such financing soon as the company could run out of cash by March, according to its budget. The injection of funds would enable it to run operations at least through the end of the first quarter. As disclosed in court filings, LightSquared expects the restructuring plan confirmation process to extend into March.

Several competing proposals for DIP loan financing have been made, including one from a Fortress Investment Group and a subset of LightSquared secured lenders. Ergen has also offered funding through an investment vehicle he controls, and a proposed loan from Harbinger was newly disclosed at Friday's hearing.

Harbinger's loans would be structured as a junior loan to avoid a fight with senior LightSquared lenders over collateral claims, as Harbinger's bankruptcy claims rank junior to those of the secured group. A senior loan from Harbinger would have elevated its claims above those of other lenders.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.