| NEW YORK, July 14
NEW YORK, July 14 After months of trying to push
Dish Chairman Charles Ergen out of its capital
structure, bankrupt wireless venture LightSquared on Monday
proposed a turnaround plan that would make Ergen its primary
lender after bankruptcy.
The surprise departure from earlier restructuring efforts
was unveiled by LightSquared at a hearing in U.S. bankruptcy
court in Manhattan. Ergen, whose $1 billion loan debt stake
makes him LightSquared's largest creditor, would become the
lender on a $1.3 billion post-bankruptcy loan facility,
replacing JPMorgan Chase & Co, which had previously
agreed to provide that money.
The deal achieves an unlikely peace between LightSquared and
Ergen, two parties whose scorched-earth litigation strategies
have made LightSquared's bankruptcy among the most litigious in
The battle lines in the case have been redrawn, but they
have not disappeared. Parties who favored previous versions of
LightSquared's plan, which were less friendly to Ergen, are now
Among them is Phil Falcone's Harbinger Capital Partners,
LightSquared's equity owner. Calling the new deal a "stunning
reversal" from previous strategies, Harbinger attorney David
Friedman said at Monday's hearing his client needs to better
"understand what is required of Harbinger under this plan."
LightSquared went bankrupt in 2012 after the Federal
Communications Commission revoked its license to operate
spectrum because of concerns about GPS interference. Ergen later
acquired about $1 billion of LightSquared's senior loan debt,
leading the company to accuse him in a lawsuit of trying to
surreptitiously take it over.
Judge Shelley Chapman in May sided with LightSquared in the
lawsuit but still rejected the company's plan to reorganize by
pushing Ergen's debt behind that of other creditors, saying the
plan went too far.
After failed mediation sessions, Ergen also opposed a second
LightSquared restructuring proposal, one that would have
subordinated some, but not all, of his debt. That plan involved
the $1.3 billion in new loans from JPMorgan and another $1.4
billion in commitments from a group including JPMorgan, Cerberus
Capital Management and Fortress Investment Group (FIG.N), which
would have converted to most of LightSquared's equity.
Ergen vowed to litigate, and a second major trial in the
case was scheduled for later this summer.
Monday's development signals a cease-fire between
LightSquared and Ergen, but not everyone is happy. Friedman,
Harbinger's lawyer, expressed concerns the plan could impede
Harbinger's ability to pursue other legal claims, because of a
condition that the company resolve recent lawsuits against Dish
and the federal government.
And a separate lending group voiced doubts over whether the
parties' commitments are solid enough to put the plan into
"We're going to be asked to fund (LightSquared) to get to
that finish line and we're concerned about writing more checks
and not have a high degree of certainty that we're going to
finish this exercise," Tom Lauria, the lenders' lawyer, said.
LightSquared said it hopes to file the details of the plan
next week, seek Judge Chapman's approval in August and put the
plan into effect by February.
(Reporting by Nick Brown; Editing by Steve Orlofsky)