NEW YORK (Reuters) - Charlie Ergen, the largest creditor of bankrupt wireless venture LightSquared, on Friday objected to a framework of the company’s restructuring plan that would pay him in the form of a note while giving other lenders cash payouts.
In papers filed in U.S. Bankruptcy Court in New York, Ergen, through his investment vehicle SP Special Opportunities, asked Judge Shelley Chapman to rule that the plan is not financially feasible, and to do so before parties devote resources to obtaining creditor support for it.
LightSquared’s $33 million bankruptcy loan is set to run out around the end of March.
“The court has the power to stop the unconfirmable plan from proceeding now, while there is still time ... to work towards a fair and confirmable plan,” SPSO said in the filing.
Ergen is the chairman of Dish Network Corp, but insists he amassed his roughly $1 billion chunk of LightSquared’s senior loan debt on his own behalf. LightSquared, owned by Phil Falcone’s Harbinger Capital Partners, has sued him in a still-pending case alleging the debt buys were a scheme on Dish’s behalf to set the stage for a Dish takeover.
The company went bankrupt in 2012, when the Federal Communications Commission revoked its spectrum license over fears that its planned wireless network could interfere with GPS systems.
The restructuring proposal in question, filed by LightSquared last Friday, tries to force Ergen to make a tough choice: accept a secured note in lieu of cash and resolve the lawsuit against him, or reject the plan but continue to face the litigation, which could result in his claim being further subordinated.
In his objection to the plan, Ergen argues that even if the sides go forward with the lawsuit and LightSquared wins, it will not have the financial ability to implement the plan.
Ergen is asking Judge Chapman to nix the plan before the parties get too deep into the process of gaining creditor and court approval. Were the plan to be found untenable after that process, LightSquared would have to scramble quickly for a new plan to avoid liquidation before running out of money.
LightSquared has “set up an ultimatum,” Ergen said.“Either the court rules that SPSO engaged in egregious inequitable conduct ... or LightSquared will hit the wall.”
A hearing on the matter is set for Monday. If Chapman approves the framework of the plan over Ergen’s objection, it would allow LightSquared to solicit support from creditors ahead of a final approval hearing on March 17.
The bankruptcy is In Re LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.
Reporting by Nick Brown; Editing by Bernard Orr