There is a possibility that the proposed transaction of DISH Network Corp (NASDAQ:DISH) to acquire the wireless spectrum assets of LightSquared, the wireless broadband network company majority owned by Philip Falcone of Harbinger Capital Partners, could fall apart.
Thomas Lauria, the lawyer representing a group of lenders for LightSquared, informed U.S. Bankruptcy Judge Shelley Chapman that LBAC, the investment vehicle of Charles Ergen, chairman of DISH Network Corp (NASDAQ:DISH) might withdraw its $2.2 billion proposal to purchase the spectrum because of technical issues.
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Dish Network raised technical issue
“Dish has raised a technical issue they believe is serious and if not fixed would impair utility of LightSquared’s spectrum,” said Lauria. According to him, Ergen’s investment vehicle has not dropped its offer, but the lawyer emphasized that it is considering the withdrawal and it has the right to do so.
Lawria added that the lenders of LightSquare are still negotiating with LBAC and DISH Network Corp (NASDAQ:DISH) regarding the issue. The lenders believe the wireless broadband network company can be reorganized and another party could buy it through an auction if Ergen’s investment vehicle decided to abandon its bid.
On the other hand, Rachel Strickland, the lawyer representing Ergen’s group said, “To the extent there is a breakdown in communication, it is a possibility LBAC will exit the agreement tonight,” Strickland said.
After learning about the potential problem confronting the reorganization of LightSquared, Judge Chapman said, “We have to figure out how to keep the company going.” Judge Chapman is set to consider that approval of a reorganization plan based on the bid of DISH Network Corp (NASDAQ:DISH) and a plan to sell a smaller portion of LightSquared spectrum to Mast Capital Management and U.S. Bancorp (NYSE:USB) later this month.
LightSquared bankruptcy exit plan
LightSquared resisted the proposal of DISH Network Corp (NASDAQ:DISH). In fact, the company submitted a bankruptcy exit plan indicating a new equity and loan worth $4 billion, which is supported by Fortress Investment Group LLC (NYSE:FIG) and Melody Capital Advisors. The investment management firms agreed to invest $1.25 billion in new equity and a $285 million loan.
In 2012, LightSquared filed for bankruptcy after the Federal Communication Commission (FCC) rejected its proposal to use its wireless spectrum in building 4G LTE network due to concerns that it would interfere with GPS navigation.