LightSquared financier Philip Falcone is preparing to submit a reorganization plan to a bankruptcy judge that would specifically block Dish Network's (NASDAQ: DISH) Charlie Ergen from receiving compensation, according to a report from the New York Post that cited unnamed sources.
Ergen reportedly has collected more than half of LightSquared's $1.7 billion in secured loans through hedge fund firm Sound Point Capital Management with an eye toward acquiring the company. However, under Falcone's plan, Ergen wouldn't be eligible for compensation as part of LightSquared's reorganization because Dish is a competitor to LightSquared and, according to LightSquared's loan agreement, cannot own LightSquared debt. According to the Post, Ergen is aware of this stipulation and is attempting to bypass it by purchasing LightSquared debt through Sound Point.
If the judge approves Falcone's plan to reorganize LightSquared, Ergen could be stuck with around $1 billion of LightSquared debt and no clear way to recover it.
But Ergen is reportedly preparing to submit his own reorganization plan for LightSquared. If that plan is approved, Ergen could effectively wrest control of LightSquared away from Falcone. Ergen could then potentially combine LightSquared's spectrum with Dish's own trove of 40 MHz of S-band satellite spectrum in the 2 GHz band, dubbed AWS-4.
LightSquared is one of the many wireless options that Dish's Ergen has pursued. Dish recently dropped its bids to purchase Sprint (NYSE:S) and Clearwire (NASDAQ:CLWR). Now, analysts expect Dish to potentially bid on another major wireless player like T-Mobile US.
LightSquared launched in 2010 with a plan to build an LTE network that could offer wholesale capacity to other providers. However, the company ran into concerns that its network would interfere with GPS receivers, a situation that pushed the FCC to reject LightSquared's network buildout plans. As a result, LightSquared filed for bankruptcy last year.
Now, in order to address the interference concerns, LightSquared is hoping to share spectrum that is currently set aside for weather balloons used by the federal government. In exchange, LightSquared said it would permanently relinquish its 10 MHz of spectrum that is directly adjacent to the frequencies used by GPS receivers.
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