LightSquared gets court approval on $33 million bankruptcy loan

NEW YORK Tue Feb 4, 2014 4:04pm EST

NEW YORK Feb 4 (Reuters) - A bankruptcy judge on Tuesday approved a $33 million loan from a group that includes Dish Network Corp Chairman Charles Ergen, to keep wireless venture LightSquared afloat as it tries to hash out a bankruptcy exit plan.

The deal, unveiled on Monday, was green-lighted by Judge Shelley Chapman at a hearing in U.S. Bankruptcy Court in Manhattan.

LightSquared's equity owner, Phil Falcone's Harbinger Capital Partners, is fighting to keep control of the company in a messy Chapter 11. An investment vehicle owned by Ergen has bought up much of LightSquared's debt, while Dish offered and later withdrew a $2.2 billion offer to purchase the company's spectrum, an offer Harbinger did not accept.

LightSquared, which had been on pace to run out of cash by March, needed a loan to be able to extend restructuring talks that could go past that.

While LightSquared agreed to include the Ergen vehicle, which is its largest single creditor, in the loan, the sides remain at odds on the broader question of how LightSquared will restructure. The company right now faces three competing restructuring proposals - one backed by Harbinger and two others put forth by creditor groups - but has said it plans to engage creditors and work toward a consensual deal.

LightSquared has sued Ergen and Dish in a separate case stemming from the bankruptcy, saying Ergen surreptitiously bought up LightSquared debt to gain control of its capital structure and effect a Dish takeover. A trial in that case is expected to resume next week.

Other LightSquared creditors, as well, have expressed frustration at some of the moves Ergen has made in the case. At Tuesday's hearing, even as the sides presented a cooperative loan, they sparred over legal fees - an issue Chapman decided to leave for a later date.

LightSquared, which wants to build a massive wireless network, filed for bankruptcy protection in May of 2012 after the Federal Communications Commission revoked its spectrum license. The FCC cited concerns that the proposed network could interfere with GPS systems.

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

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