LightSquared’s auction has been put on hold after private equity firm Centerbridge Partners hatched tentative plans to pay around US$5bn for its equity and debt.
The move seeks to upstage DTH giant Dish Network’s US$3.8bn opening offer and has the…
LightSquared’s auction has been put on hold after private equity firm Centerbridge Partners hatched tentative plans to pay around US$5bn for its equity and debt.
The move seeks to upstage DTH giant Dish Network’s US$3.8bn opening offer and has the backing of hedge fund Harbinger Capital Partners, which owns most of the satellite/terrestrial venture’s equity.
Both deals assume roughly US$1.7bn in various liabilities. But Dish’s offer would wipe out Harbinger’s equity whereas it is understood the one from Centerbridge would see the Philip Falcone-controlled group remain as a minority investor, along with JP Morgan and Fortress Investment Group. The latter is thought to have previously had its own plans to acquire LightSquared.
However, unlike Dish’s deal, the Centerbridge plan is dependent on LightSquared getting regulatory permission to deploy LTE services with its spectrum. It is also for the entire company, while Dish is focussing on a subsidiary that excludes 5 MHz of leased spectrum.
The auction upset is the latest twist in a long-running battle between Falcone and Dish chairman Charlie Ergen to one up each other.
A day before the auction was supposed to take place, LightSquared’s bankruptcy judge scotched Ergen’s attempt to fully dismiss a lawsuit accusing him of improperly becoming the largest holder of its debt.
The legal action by LightSquared, which effectively revives an earlier suit by Harbinger that was partially dismissed in court, claims Ergen achieved the position by violating covenants forbidding strategic buyers from owning its debt.
With Centerbridge entering the fray, the next steps for LightSquared’s Chapter 11 process are unclear.
Previously there had been four Chapter 11 bankruptcy plans that were competing for approval. Two of them, put forward by LightSquared and Mast Capital Management LLC/US Bank National Association, also involved the sale of some or all of the assets. Meanwhile a plan by Harbinger called instead for a reorganisation while it negotiates with regulators for a way around the spectrum interference issues that have prevented it from rolling out LTE.
Analysts at New Street Research said: “We believe there is a decent chance that the court will give Centerbridge until the Dish offer expires on 14 February 2014 to perfect its offer.
“If the conditions are not met by the time the Dish offer expires, the process is tough to call; however, the court may have a hard time turning down an unconditional offer from Dish that pays out all of the debt holders at that point. In addition, there is always a prospect that Dish sweetens its offer at some point.”
However, Dish has looming build-out requirements under rules that govern the spectrum it has already acquired. The group is also awaiting a decision by 22 December from the FCC for downlink flexibility on these frequencies – a move that could increase their value.
Ergen has said previously that other options he could consider for his spectrum include acquiring a company, selling Dish, merging or partnering.
