NEW YORK, March 18 (Reuters) – Bankrupt U.S. wireless venture LightSquared filed a new restructuring plan on Wednesday that would pay the full $1.5 billion claim to its largest creditor, Dish Network Corp Chairman Charles Ergen, in cash, with interest.
The plan, outlined at a hearing in U.S. Bankruptcy Court in Manhattan, is premised on a $1.515 billion financing commitment from Jefferies Finance LLC, who would pocket a $174 million fee and other compensation for arranging the deal.
In LightSquared’s three years in Chapter 11, there has been a parade of failed restructuring plans and litigation between the company and Ergen over the legality of his purchase of a huge chunk of LightSquared loan debt.
But this is the first proposal that would pay the full amount, in cash, of Ergen’s $1 billion claim, with interest.
Ergen may still harbor objections to the plan. His lawyer, Rachel Strickland, drew the frustration of Judge Shelley Chapman on Wednesday when she intimated that her client is “still evaluating” the deal.
“They’ve done what you’ve told them they needed to do,” Chapman told Strickland, adding that the plan provides the cash payout Ergen has long sought.
Strickland’s complaints could be mere formality as she faces a legal quandary. Ergen on Tuesday pledged his support to a separate restructuring sponsored by LightSquared creditors that would pay most but not all of his claim in cash. Under the support agreement, Ergen is not allowed to oppose the plan or show support for a competing one.
While LightSquared’s plan would appear preferable to Ergen, to overtly support it could render him vulnerable to accusations of breaching the support agreement.
Chapman will consider the LightSquared plan at a March 26 hearing.
Under the new plan, LightSquared owner Harbinger Capital Partners, which is managed by Phil Falcone, would retain 44 percent of the company’s equity, but cede voting control. Centerbridge Partners and Fortress Investment Group would own a combined 34 percent of the equity.
LightSquared’s bankruptcy is closely watched because the company’s main asset, wireless spectrum, is considered very valuable. Just how valuable it is, and what it can be used for, is fiercely debated among stakeholders, and the bankruptcy will determine who ultimately controls it.
The Reston, Va.-based company wanted to use the spectrum to build a massive wireless network, but fears of GPS interference caused the Federal Communications Commission to revoke its license in 2012, pushing it into bankruptcy.