LightSquared Unveils Restructuring Plan

NEW YORK--- Philip Falcone's LightSquared on Tuesday unveiled a $3.05 billion restructuring plan that would give 74% of the wireless venture to Cerberus Capital Management LP, Fortress Investment Group LLC and J.P. Morgan Chase & Co., and leave Mr. Falcone with just 12.5% of the reorganized company's equity.

Investors would pump $1.75 billion of new money into LightSquared, with Cerberus, Fortress and J.P. Morgan contributing a bulk of that, lawyers told Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan. An additional $1.3 billion would be raised through the debt markets. The company wants its plan, which isn't finalized and hasn't been filed with the court, to be approved by the end of September.

Dish Network Corp. Chairman Charlie Ergen, LightSquared's top secured lender, would be paid $470 million in cash for his holdings and would receive a $492 million unsecured note. The amount Mr. Ergen could actually recover on that note is subject to a trial over what percentage of his recovery should be placed below other claims in the case. Judge Chapman r uled earlier this year that as a LightSquared competitor, Mr. Ergen violated the spirit of a credit agreement when he purchased his debt and that some would be subordinated below other claims. Mr. Ergen bought his debt as Dish was bidding on LightSquared's wireless spectrum, an offer it later dropped.

A group of hedge funds owning the same type of bank debt as Mr. Ergen would be paid in full, in cash, but have agreed to take slightly less than the full amount owed if LightSquared's plan becomes effective by Sept. 30.

A prior plan, rejected by Judge Chapman for being unfair to Mr. Ergen, was led by Fortress and would have allowed Mr. Falcone and Harbinger to keep at least 35% of the company's equity. The plan called for Mr. Falcone and other representatives of his Harbinger Capital Partners hedge fund firm to resign from the LightSquared board. Last month, Mr. Falcone and the other Harbinger representatives did resign from the company's board.

After mediation with Judge Robert Drain that ended last week, LightSquared came to court Tuesday with the details of its new proposal. In a filing last week, Judge Drain said Mr. Ergen didn't participate "in good faith" in the mediation, and that he "wasted the parties and the mediator's time and resources." A Dish spokesman hasn't responded to Mr. Drain's report.

Rachel Strickland, a lawyer for Mr. Ergen, said in court Tuesday that LightSquared's timetable for the separate trials---one for the new restructuring plan and the other over Mr. Ergen's debt holdings---is too short and doesn't allow the sides a chance to conduct discovery.

Ms. Strickland, of Willkie Farr & Gallagher LLP said she spoke to Judge Drain yesterday, and that the conversations were "constructive."

The presence of the private equity and hedge fund giant Cerberus, reported last Friday by The Wall Street Journal, came as a surprise. Mr. Falcone, who still controls most of LightSquared's equity through his Harbinger Capital Partners hedge fund firm, had testified in bankruptcy court earlier this year that he didn't want to work with Cerberus when he was pursuing a restructuring plan.

LightSquared filed for Chapter 11 in May 2012 after federal regulators refused to clear its plans to launch its wireless network, which they said could interfere with global-positioning systems.

Without support from the Federal Communications Commission, LightSquared isn't able to fully use spectrum---limited pockets of airwaves that mobile-phone and Internet companies use----that it owns.

Write to Joseph Checkler at [e-mail]

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