A key bankruptcy court hearing on whether to validate LightSquared’s restructuring plan is due to kick off today, despite last minute disputes over expert testimony and a hedge fund’s rival exit plan. The trial is expected to take a week and will…
A key bankruptcy court hearing on whether to validate LightSquared’s restructuring plan is due to kick off today, despite last minute disputes over expert testimony and a hedge fund’s rival exit plan.
The trial is expected to take a week and will see the US satellite/terrestrial venture argue why the proposal, which is being backed by its hedge fund equity owner Harbinger Capital Partners, is fair to creditors.
Harbinger will retain a 44% stake in the group but will cede operational control under the deal, which involves US$1.25bn in exit financing. Fortress Investment Group, Centerbridge Partners and an affiliate of JP Morgan will own the rest.
However, the proposal is being opposed by LightSquared’s largest debt holder SPSO, a vehicle owned by US DTH giant Dish Network chairman Charlie Ergen.
Ergen, who would be repaid in a long term note rather than cash under the terms, has been battling Harbinger’s founder Philip Falcone for control over LightSquared for much of its nearly three years in Chapter 11 protection.
Falcone secured a small victory last week when Judge Shelley Chapman struck a portion of planned testimony from restructuring specialist Jim Millstein, who Ergen had called in as an expert witness on the plan’s fairness, in the run up to today’s hearing. Ergen may appeal the decision.
Meanwhile, hedge fund Solus Alternative Asset Management, a LightSquared creditor and preferred stock holder, has submitted a rival restructuring proposal that would inject US$2bn into the venture.
Its plan, comprising a US$742m financing and a US$1.25bn backstop commitment, would see it get preferred shares in the group’s LightSquared LP unit, while securing a majority stake in the parent company.
Harbinger would be allowed to select one of LightSquared’s board members, and Ergen would be offered a toggle provision where it could receive US$500m in cash and US$500m in replacement debt.
Chapman has said she will first rule on LightSquared’s proposal before considering the one from Solus, and then possibly choosing between the two.
LightSquared entered voluntary Chapter 11 bankruptcy in May 2012 after its spectrum was found to interfere with GPS technology. The group has seen several restructuring proposals during this time, as well as litigation between the various parties.
