LightSquared lenders rally behind plan by Dish's Ergen to buy company

A group of LightSquared's lenders filed a reorganization plan in bankruptcy court today that would largely follow the lines of Dish Network (NASDAQ: DISH) Chairman Charlie Ergen's $2.2 billion bid for control of LightSquared's spectrum holdings.

According to Dow Jones Newswires, the Ergen-led group said the bid would pay in full the company's $1.7 billion in bank debt. LightSquared last week lost control of its own bankruptcy reorganization plan and said that it expected multiple proposals to reorganize the company.

The lender group, which owns debt in the LightSquared LP unit that controls the company's spectrum, includes Capital Research & Management, Cyrus Capital Partners, Intermarket Corp., UBS, Stamford Branch and SP Special Opportunities, which is owned by Ergen. Ergen's L-Band Acquisition LLC already made a $2 billion cash offer for LightSquared's assets earlier this year.

The new proposal is only for LightSquared LP's assets, which includes 46 MHz of L-Band MSS spectrum. LightSquared Inc., which is 96-percnet-owned by Phil Falcone and his Harbinger Capital Partners hedge fund, is not part of the deal; LightSquared Inc. indirectly owns the equity of LightSquared LP.

LightSquared has not been able to get creditors to support a reorganization timeline and has offered a streamlined process, which Bloomberg reported is scheduled to be evaluated today in U.S. Bankruptcy Court in Manhattan. LightSquared wants to have outlines of all competing reorganization plans filed by Sept. 4, with a Dec. 16 confirmation hearing to approve the best one.

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. Analysts have said Dish may now try to partner with T-Mobile US (NYSE:TMUS).

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.

"Now LightSquared has set out a lengthy timetable for an auction in December 2013 (which is already subject to an objection from the Secured Lenders), because (in fantasyland) Harbinger is apparently highly confident that the FCC will approve LightSquared's request in November, enabling them to raise money for a counterbid on the back of that approval, before the auction actually takes place," TMF Associates analyst Tim Farrar wrote in a blog post. "However, even if LightSquared's proposed timetable is approved (and it appears that the judge is actually losing patience with the company's repeated delays), it seems rather more likely that Falcone is instead going to be 0 for 3 in his battles with Ergen (with LightSquared following the path trodden by DBSD and TerreStar)."

For more:
- see this Bloomberg article
- see this Dow Jones Newswires article
- see this TMF Associates blog post

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