LightSquared preps for tough trial on latest bankruptcy plan

[March 06, 2015]  By Nick Brown

NEW YORK (Reuters) - LightSquared gained momentum this week in its effort to end its three-year bankruptcy after a judge dealt a blow to its main creditor and adversary, Charles Ergen, ahead of a week-long trial on its latest debt restructuring plan.

LightSquared, the would-be wireless provider owned by Phil Falcone's Harbinger Capital Partners hedge fund, on Monday will begin seeking U.S. Bankruptcy Court approval for a plan to exit Chapter 11, repay lenders and transfer some equity to Fortress Investment Group and Centerbridge Partners. Harbinger would keep a 44 percent equity stake but cede operational control.

LightSquared must convince bankruptcy Judge Shelley Chapman, in New York, that the plan is fair to creditors.

The company filed for Chapter 11 and shelved its planned wireless network in May 2012, when the Federal Communications Commission revoked its spectrum license over concerns of interference with global positioning systems. The case has been one of the most litigious in recent years, as stakeholders dispute the projected value of the spectrum, LightSquared's main asset.

Ergen, who is chairman of Dish Network Corp and LightSquared's largest creditor, opposes the plan, which would repay him in a long-term note, rather than cash. Ergen took a hit on Wednesday, when Chapman struck a portion of planned testimony from restructuring guru Jim Millstein, Ergen's expert witness on the plan's fairness.

Millstein's expert report, which will form the basis for his testimony, relies heavily on expertise from Tom Peters, a former FCC telecom chief. LightSquared convinced Chapman that Peters was the real spectrum expert and she barred Millstein from testifying about Peters' work. Ergen may appeal the ruling.

The plan still faces hurdles, including a handful of stakeholder objections and a competing restructuring proposal from lender Solus Alternative Asset Management, which wants to supply bankruptcy financing in exchange for equity.

History is not on LightSquared's side: since it filed for bankruptcy, no fewer than seven restructuring plans have failed, either nixed by Chapman or abandoned over creditor disputes.

Its primary agitator has been Ergen, who bought about $1 billion of LightSquared's loan debt through investment vehicle SPSO.

LightSquared accused Ergen of surreptitiously gaining control of its debt to force a Dish takeover. Ergen insists the purchases were personal investments and has accused LightSquared of treating his debt unfairly.

Millstein is scheduled to testify on Thursday. The trial is slated to open on Monday with testimony from LightSquared Chief Executive Doug Smith.

(Reporting by Nick Brown; Editing by Richard Chang)

[© 2015 Thomson Reuters. All rights reserved.]

Copyright 2015 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.