(Adds liquidity details, background and quotes throughout from
Tuesday's court hearing)
By Nick Brown
NEW YORK, July 1 Bankrupt wireless venture
LightSquared on Tuesday revealed a new restructuring proposal
that would cede 74 percent of its equity to a new investor group
that includes JPMorgan Chase & Co, Cerberus Capital
Management and Fortress Investment Group.
Phil Falcone's Harbinger Capital Partners, which now
controls LightSquared, would retain about 12.5 percent of the
new equity, according to Joshua Sussberg, a lawyer for a
committee overseeing LightSquared's restructuring efforts.
Sussberg was speaking at a hearing in U.S. Bankruptcy Court in
JPMorgan, Cerberus and Fortress would supply $1.45 billion
in new liquidity, with other investors in the group chipping in
another $300 million. Existing lenders with around $1 billion in
debt would be repaid in cash.
LightSquared's largest creditor, Dish Network Corp
Chairman Charles Ergen, would be paid back with $470 million in
cash and an unsecured note worth at least $492 million, said
Sussberg, who is with Kirkland & Ellis.
Ergen has not agreed to the plan, and while his lawyer,
Rachel Strickland, said she is willing to keep discussing a
possible compromise, she is also preparing for a fight. On
Tuesday, Strickland called for a full-fledged trial on the
LightSquared and Ergen have been bitter rivals throughout
the bankruptcy. LightSquared has accused Ergen of
surreptitiously buying up its debt in violation of a credit
agreement that bars competitors like Dish from owning company
debt. Ergen insisted the investment was personal.
LightSquared went bankrupt in 2012 after the Federal
Communications Commission revoked its spectrum license because
of fears that its planned wireless network could interfere with
The patience of Judge Shelley Chapman, overseeing the case,
has worn thin as the bankruptcy reaches its 26th month and gears
up for what could be a second major trial, tentatively scheduled
for late August.
In the first weeks-long trial over whether Ergen used
underhanded means to acquire his LightSquared debt, the judge
found no heroes. In her May ruling, she rejected LightSquared's
proposed restructuring but blamed both sides for their inability
Chapman sent both sides to mediation under fellow U.S.
Bankruptcy Judge Robert Drain. In a report last week, Drain said
Ergen "wasted the parties'...time," refusing to negotiate in
good faith and leaving one of the sessions without Drain's
LightSquared and its other creditors now have a new plan
they like. But on Tuesday, Ergen's camp demanded another lengthy
two-phase trial that examines both the plan's overall legality
and the appropriateness of how it treats Ergen's debt.
Chapman chided Strickland, Ergen's lawyer, over perceived
delay tactics, saying "delay is not this case's friend, but
delay is something that can be utilized by your client at this
Ergen "is not looking for delay," Strickland said. "My
client is looking for his day in court."
(Reporting by Nick Brown in New York; Editing by Tom Hals, Phil
Berlowitz and Jan Paschal)