A group of lenders to Philip A. Falcone’s LightSquared Inc. seeks to end his control of the bankrupt company through an auction that would have a leading bid from a unit of Dish Network Corp. (DISH:US) valued at $3.5 billion.
The $2.22 billion bid from Dish, founded by billionaire Charlie Ergen, is worth more because it includes assumption of obligations under the company’s contracts with Inmarsat Plc and Boeing Co., lenders said in papers filed yesterday in bankruptcy court in Manhattan.
During LightSquared’s 15 months in bankruptcy, prospects for creditors have worsened as Falcone ignored the $2.22 billion cash offer from Dish’s L-Band Acquisition LLC and admitted wrongdoing in a Securities and Exchange Commission enforcement action. His investment company, Harbinger Capital Partners LLC, also sued the global positioning system industry, the lenders said in court papers.
The GPS lawsuit is “sure to have a chilling effect on the debtors’ current efforts before the Federal Communications Commission” to obtain the regulatory approval that Falcone’s own reorganization plan is premised on, and the other actions by the billionaire mean “the debtors’ prospects of solving their problems are increasingly bleak,” the lenders said.
The lenders are seeking approval of an outline for their plan to reorganize the broadband-network services provider at a Sept. 30 hearing and aim to end an auction by Dec. 6 and win final plan approval by Dec. 10.
Falcone and Harbinger agreed Aug. 19 to pay an $18 million fine and Falcone accepted a five-year ban from the securities industry. The SEC had accused him of improperly borrowing from the fund and favoring some investors over others.
LightSquared had said it expected competing proposals to reorganize its assets. The company lost the exclusive right to control its reorganization July 15.
The lender group, which owns debt in the LP unit, includes Capital Research & Management Co., Fir Tree Capital Opportunity Master Funds LP, Cyrus Capital Partners LP, Intermarket Corp., UBS AG (UBSN) and SP Special Opportunities LLC, a fund owned by Ergen.
LightSquared, based in Reston, Virginia, filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion.
The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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