LightSquared Inc., Philip Falcone’s wireless broadband company, agreed on tentative terms of a reorganization plan that would give majority ownership to JPMorgan Chase & Co. (JPM:US), Fortress Investment Group LLC (FIG:US) and Cerberus Capital Management LP, a lawyer said.
Falcone’s Harbinger Capital Partners LLC would retain a small stake under the plan, which will work only if LightSquared exits bankruptcy by Sept. 30, Joshua Sussberg, a lawyer for a special LightSquared committee, told U.S. Bankruptcy Judge Shelley Chapman today. The agreement was reached in mediation following a dispute with creditor Charles Ergen over how his $1 billion in debt would be treated.
“It’s been 24 hours of discussion and many days of back-to-back negotiation,” Sussberg, with Kirkland & Ellis LLP, said at a court hearing in Manhattan. LightSquared still intends to discuss a potential backup plan, and timing to implement the new proposal will be critical given the company’s dwindling cash, he said.
The plan would be financed with a $1.3 billion first-lien credit facility and the investment of $1.75 billion in new money, Sussberg told Chapman. Cerberus, Fortress and JPMorgan would end up with 74 percent of LightSquared’s new common equity and Harbinger would have 12.5 percent, Sussberg said.
SP Special Opportunities, Ergen’s fund, would get $470 million in cash and an unsecured note. The treatment of that note has yet to be determined, Sussberg said.
Chapman ordered the mediation after she said a prior plan, designed by Falcone, the company’s controlling shareholder, was unfair to Ergen. She also criticized the Dish chairman’s actions during the bankruptcy.
LightSquared, based in Reston, Virginia, sought bankruptcy protection in 2012 after the Federal Communications Commission blocked its service, saying it might interfere with global positioning system navigation equipment. LightSquared still hasn’t obtained U.S. regulatory approval to use its airwaves.
Under the rejected plan, LightSquared sought to put Ergen’s $1 billion debt claim behind those of other creditors as it reorganized with $2.5 billion in financing backed by JPMorgan, Fortress and Melody Capital Advisors LLC, leaving Falcone with an equity stake in a new company.
The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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