By Tom Hals and Liana B. Baker
Dec 26 LightSquared is proposing a new
bankruptcy exit plan with financing from Fortress Investment
Group and other backers, as the U.S. wireless
communications company seeks to avoid a sale to highest bidder
Dish Network Corp.
LightSquared would receive $2.75 billion in fresh loans and
at least $1.25 billion in equity investment from private equity
firms Fortress and Melody Capital Advisors LLC, as well as
JPMorgan Chase & Co and Harbinger Capital Partners,
court documents filed late Tuesday show.
Harbinger, billionaire Philip Falcone's hedge fund, is
LightSquared's controlling shareholder.
The investment firms' participation highlights the fierce
competition for wireless spectrum, or broadband frequencies, in
the United States. Many U.S. mobile operators are buying
spectrum to boost their networks as customers use more and more
bandwidth-hungry data services on phones and tablets.
The plan, filed in Manhattan's U.S. Bankruptcy Court,
replaces one based on an auction of the company's assets earlier
this year. LightSquared scrapped that sale after Dish emerged as
the only qualified bidder, with a $2.2 billion offer and terms
that LightSquared found unappealing.
It is unclear whether Dish would try to outbid the new group
of investors. A Dish spokesman declined to comment on the
company's plans on Thursday.
Dish Chairman Charlie Ergen has been acquiring billions of
dollars worth in wireless airwaves to diversify his satellite
television business, and has been battling Falcone for control
of the company. Falcone had sued Ergen for illegally trying to
take control of LightSquared, alleging that Ergen had made
improper trades and violated a key credit agreement by buying up
about $1 billion of LightSquared's debt in secret.
That case was thrown out in October but LightSquared has
sued Ergen in an effort to revive the case.
Wunderlich Securities analyst Matt Harrigan said Dish is
likely to bow out, but Ergen's wireless plans are far from over.
"This was not unexpected but I have to believe that Ergen
really wanted LightSquared. It would have been nice for Dish to
use that spectrum," Harrigan said.
He added that Dish is still involved in a government auction
for additional spectrum and could try to acquire T-Mobile as
SoftBank is in talks to buy T-Mobile early through its
investment in Sprint, Reuters has reported. Dish
is also said to be exploring a bid for carrier T-Mobile, and
regulators say that tie-up would face much less regulatory
scrutiny than a Sprint bid.
FCC APPROVAL NEEDED
The latest proposal is subject to approval of LightSquared's
license application by the Federal Communications Commission,
which could take many months.
LightSquared would borrow at least $285 million from Melody
to cover the period between court's approval of the new plan,
which could come as soon as January, and the FCC approval.
LightSquared filed for bankruptcy last year after the FCC
blocked its plan for a 4G LTE terrestrial wireless network
because the regulator feared it would interfere with GPS
In November, LightSquared sued GPS industry leaders
including Garmin International Inc for reneging on
representations to LightSquared that its network would not
interfere with global positioning systems devices.
U.S. Bankruptcy Court Judge Shelley Chapman ordered a
hearing on LightSquared's motion to modify its reorganization
plan for 10 a.m. EST Monday.
LightSquared argued it should be allowed to implement the
new plan without going back to creditors to get their approval
because the latest deal increases the recovery for creditors.
A hearing to confirm LightSquared's proposed plan is
scheduled for Jan. 9.
The company's assets would be worth $8.4 billion, assuming
the plan goes into effect on Sept. 30 and the FCC approves the
company's license, the documents show.
The case is In re: LightSquared Inc, U.S. Bankruptcy Court,
Southern District of New York, No. 12-12080.