NEW YORK (Reuters) - Creditors of bankrupt broadband owner LightSquared Inc can vote on competing plans by LightSquared, its creditors and its primary shareholder, Harbinger Capital, on how to restructure the company, a judge ruled on Wednesday.
Judge Shelley Chapman, in U.S. Bankruptcy Court in Manhattan, said she would sign off on each of the competing plans after the sides resolved disputes surrounding certain disclosures in the language of the proposals.
LightSquared, controlled by Phil Falcone’s Harbinger, is trying to stave off an aggressive bid by Dish Network Corp (DISH.O), owned by Charlie Ergen, for control of its spectrum. The assets are likely to be auctioned off to the highest bidder, with Dish having already made a baseline offer for some of the spectrum.
LightSquared and its lenders have pushed competing proposals for the parameters of a sale, while Harbinger has put forth a plan that would restructure LightSquared without a sale.
LightSquared filed for Chapter 11 in May of 2012, after the Federal Communications Commission tentatively stopped it from building its network amid concerns in the GPS industry about potential signal interference from a swath of LightSquared’s broadband.
Subject to final court approval over the revised language in the plan outlines, creditors will have the right to vote for any of the proposals by December 5.
LightSquared’s restructuring plan, along with two other plans proposed by different groups of lenders, contemplates an auction of the company’s assets while LightSquared continues to pursue FCC approval to develop its suspended spectrum.
Harbinger’s proposal does not contemplate a sale, instead focusing on reaching a regulatory solution with the FCC, which Harbinger has said would boost the value of the company to $5.65 billion. LightSquared would then repay current outside creditors in full with proceeds from new financing.
Harbinger wants to retain control of LightSquared, and auctioning off the company’s assets would undermine that effort. But LightSquared has received bids for its assets, including Dish’s, and with no clear resolution in sight to its regulatory obstacles, Judge Chapman has pushed the company to solicit additional buyers through an auction.
In July, an acquisition vehicle owned by Dish set a baseline bid of $2.22 billion in cash and about $1.3 billion in assumed contractual obligations for spectrum belonging to LightSquared’s operating company. If another suitor tops Dish’s proposal, LightSquared would owe it a $51.8 million break-up fee.
Dish’s current bid would remain valid for 60 days after LightSquared chooses another buyer, which offers the company some protection in case the transaction falls apart, particularly for regulatory reasons.
In August, MAST Capital, the sole backer of LightSquared’s $63 million bankruptcy loan, bid the full amount of the loan, plus $1, for spectrum leases at LightSquared’s parent company.
Bidding procedures enabling other suitors to bid for some or all of the company’s assets were finalized last week.
Further complicating matters for Harbinger is the effect of sequestration on the FCC. The agency’s workers have largely been furloughed, which could delay FCC clearance for the company.
Reporting by Bill Cheung in New York