The LightSquared bankruptcy saga continues. Two private equity firms, Cerberus Capital Management and Solus Alternative Asset Management, proposed a new restructuring plan for LightSquared that has garnered the support of Dish Network (NASDAQ: DISH) Chairman Charlie Ergen, LightSquared's largest creditor.
Under the deal, which has not been formally submitted to the bankruptcy court overseeing LightSquared's case, the firms would pay Ergen in cash to acquire $950 million of his $1 billion debt claim on the company.
Then, the two firms would receive notes from the company putting them behind other LightSquared lenders in terms of getting repaid. Cerberus and Solus would also inject new financing into LightSquared and take a 34 percent equity stake to be issued by LightSquared as part of the proposed plan.
The new proposal will compete with a separate LightSquared-backed plan, whose fairness is the subject of an ongoing trial in U.S. Bankruptcy Court in Manhattan, Reuters noted. That plan is being pushed by Fortress Investment Group and Centerbridge Partners, which would take the same 34 percent stake under their proposal.
Importantly, both plans would allow Philip Falcone's Harbinger Capital Partners hedge fund, LightSquared's current owner and chief backer, to retain some equity but relinquish operational control of the company. As Reuters noted, the fairness trial continued on Tuesday, as Bankruptcy Court Judge Shelley Chapman said she would wait to consider the Cerberus plan while reviewing LightSquared's.
Ergen could be the kingmaker in the saga, though, and his support could give the edge to Cerberus and Solus. Ergen is staunchly opposed to LightSquared's own plan, which would pay most of his claim in notes rather than cash, according to Reuters.
According to Reuters, in court on Tuesday a lawyer for a committee overseeing LightSquared's bankruptcy said the committee may turn its attention to responding to Cerberus' plan, perhaps by submitting a plan that provides similar or better terms for creditors.
LightSquared initially launched with the goal of building a nationwide wireless LTE network that other companies could use in order to offer their own services to customers. The company entered bankruptcy protection in May 2012 after the FCC revoked its conditional license to operate because of unresolved concerns that LightSquared's planned LTE-based network in the L-band would interfere with GPS receivers. LightSquared vigorously contested that move and sued the FCC in July 2014, but the firm has been mired in bankruptcy proceedings because Chapman has yet to fully approve any one plan. Falcone accused Ergen of illegally acquiring its debt to lead to a Dish takeover, but Ergen said it was merely a personal investment, and last summer LightSquared settled the debt dispute with Ergen.
- see this Reuters article
Dish's Ergen would get control of LightSquared in latest restructuring deal
LightSquared burned through $81.4M in August, as bankruptcy proceedings churn on
Falcone fights to keep control of LightSquared as bankruptcy maneuvering drags on
LightSquared settles debt dispute with Dish's Ergen
Dish, Ergen sued over LightSquared … again
LightSquared strikes new $3B restructuring deal, but Dish's Ergen looms as a stumbling block