October 6, 2014 / 10:36 PM / 4 years ago

U.S. bankruptcy judge orders LightSquared parties back to mediation

NEW YORK, Oct 6 (Reuters) - Creditors of bankrupt wireless company LightSquared and the company’s owner, Harbinger Capital Partners, will once again try to reach a mediated restructuring deal after a judge raised the prospect of converting the case to a Chapter 7 liquidation.

With a deadline for confirming a plan just weeks away, Harbinger and two creditors, MAST Capital and JP Morgan, had crafted a plan that would carve out and hand over certain spectrum assets to creditors.

Lenders who have collateral claims on LightSquared’s operating assets objected, arguing the plan could derail the process for getting regulatory approval for LightSquared’s spectrum.

LightSquared filed for Chapter 11 in May 2012 after the Federal Communications Commission revoked its license to operate its spectrum because of concerns it interfered with GPS systems. Its case has been one of the messiest and most contentious in recent memory, with a handful of reorganization plans proposed and ultimately derailed.

The latest disagreement comes after parties indicated they had signed onto a consensual restructuring deal that was worked out during a round of mediation this summer. That deal fell apart when Harbinger filed its latest restructuring plan.

“We are nowhere,” Judge Shelley Chapman said during Monday’s hearing.

Chapman broached the subject of winding down the company by converting the case into a Chapter 7.

Lawyers for LightSquared asked for more time to bridge differences among the conflicting factions, arguing that the company has “valuable assets” and hundreds of jobs would be at stake.

LightSquared offers the promise of delivering mobile broadband services nationwide, provided it can overcome the concerns regulators have about its network.

Chapman faulted Harbinger’s breakaway restructuring plan as an attempt to “hijack the case,” although she did state that she would consider the proposal as part of confirmation hearings.

Taking a poll of where various creditors and parties stood on the restructuring talks, Chapman proceeded to order a re-opening of mediation talks to bring factions back to the negotiation table to forge a deal that would win broad consensus. The talks will again be mediated by Judge Robert Drain.

The court has pushed back bankruptcy confirmation hearings to Nov. 10 from Oct. 20 to give the parties more time to reach an agreement. (Reporting by Billy Cheung in New York. Writing by Tom Hals in Wilmington, Delaware. Editing by Andre Grenon)

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