LightSquared Bankruptcy Exit Plan Supported by Fortress, Melody

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LightSquared, the wireless broadband network company, submitted a new plan to exit from bankruptcy court protection, which would allow its largest shareholder, Philip Falcone, CEO of Harbinger Capital Partners to retain control over some of his stake in the company.

LightSquared exit plan explained

The legal counsel of the company filed documents to the United States Bankruptcy Court I New York on how it would obtain at least $1.25 billion in new equity and $2.75 billion exit financing for the restructured LightSquared.

Fortress Investment Group LLC (NYSE:FIG) and Melody Capital Advisors supported the new bankruptcy-court protection exit of LightSquared, which agreed to invest $1.25 billion in new equity and $285 million loan, respectively. Harbinger Capital Partners and JPMorgan Chase & Co. (NYSE:JPM) also backed the proposal.

LightSquared indicated in the court documents that the new debt and equity of more than $4 billion would be enough to meet all the claims of its creditors and equity investors. The new proposal would be subject to the approval of regulators including the Federal Communications Commission (FCC) as the company wants to carry out a spectrum swap in order to expand its network.

The wireless broadband network company cancelled its auction process because it did not receive any other bid to compete with the $2.2 billion offer from DISH Network Corp (NASDAQ:DISH) to acquire the majority of its spectrum. The bid was part of the reorganization plan proposed by a group of lenders including the investment vehicle of Dish Network’s Chairman, Charles Ergen with almost $2 billion claims against LighSquared.

Tangled web of lawsuits

Harbinger Capital Partners filed a lawsuit against Ergen alleging that the offer of DISH Network Corp (NASDAQ:DISH) was “lowball, and bad-faith.” The firm also accused Ergen of covertly buying LighSquared’s debt through a separate proposal to gain control. Harbinger argued that Ergeb tried to get around provisions in the agreements of LighSquared prohibiting competitors such as Dish Network from buying its debt.

LightSquared filed for bankruptcy protection after the FCC rejected its plant to build a 4G LTE network due to concerns that it would block GPS navigation. Centerbridge Partners L.P., a private equity firm, recently abandoned its plan to acquire LightSquared for $5 billion.

Judge Shelley C. Chapman is scheduled to conduct a hearing on Monday to determine whether the new bankruptcy court protection exit plan would allow LightSquared to obtain approval without the need for creditor’s vote.

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