NEW YORK May 27 LightSquared and its creditors, including Dish Network Corp Chairman Charles Ergen, will go into court-ordered mediation to settle on a plan to restructure the bankrupt wireless venture, lawyers said on Tuesday.
Judge Shelley Chapman, who oversees LightSquared's bankruptcy in New York, had given sides until Tuesday to forge a consensual plan to get LightSquared out of Chapter 11, or else mediate under Judge Robert Drain, a Chapman colleague who presided over the 2012 bankruptcy of Hostess Brands.
At a hearing in Chapman's courtroom on Tuesday, Paul Basta, a lawyer for an independent committee supervising the LightSquared restructuring, said sides had made some progress on a new deal but needed help getting "across the finish line."
It sought bankruptcy protection in 2012 after U.S. regulators revoked its license to operate spectrum because of concerns about interference with global positioning systems (GPS).
LightSquared, owned by Phil Falcone's Harbinger Capital Partners, sued Ergen, its largest creditor, saying he used underhanded means to acquire his $1 billion debt stake and tried to set the stage for a takeover by Dish.
The wireless venture had hoped to restructure under a plan that would subordinate Ergen's debt, pushing it behind other creditor claims.
Chapman earlier this month rejected the plan as unfair to Ergen, ruling that only a portion of his debt should be subordinated. She ordered settlement talks and set Tuesday as a deadline to avoid mediation.
Basta on Tuesday said sides have discussed a global restructuring that would require new financing, but he gave no detail about the deal or where the financing would come from.
LightSquared is surviving in bankruptcy through a loan package that runs out on June 15, but a company lawyer on Tuesday said it has enough cash to last it through the end of June. It has asked lenders to extend the maturity and is waiting on their consent, the lawyer, Matthew Barr, said.
LightSquared may need more bankruptcy loans if mediation extends past June 30. (Reporting by Nick Brown; Editing by Steve Orlofsky)