LightSquared’s lenders have appeared in court to argue for permission to sue the satellite/terrestrial venture’s hedge fund owner over its controversial July 2011 loan.
An ad hoc group, representing lenders owed around US$1.1bn, claim Harbinger…
LightSquared‘s lenders have appeared in court to argue for permission to sue the satellite/terrestrial venture’s hedge fund owner over its controversial July 2011 loan.
An ad hoc group, representing lenders owed around US$1.1bn, claim Harbinger Capital Partners improperly extended the loan to gain more clout during LightSquared’s bankruptcy process.
The lenders say the loan, worth US$263.75m, should have been classed as an equity investment rather than debt. They have made it clear in previous court documents that their issue is not with LightSquared or its officers, and seek to charge Harbinger on behalf of the company. The lenders are also attempting to sue a unit of US Bancorp, in its capacity as agent of the loan.
However, during the hearing yesterday, Harbinger claimed the lenders have no legal standing to sue because they are technically creditors of a creditor, according to court reports.
A lawyer acting on behalf of Harbinger was also cited saying the claims may be unnecessary anyway as the lenders would be repaid in full, owing to the possibility of LightSquared’s spectrum allegedly being worth as much as US$12bn.
Judge Shelley Chapman declined to rule on whether the lenders could sue Harbinger. Chapman was also cited saying she was unlikely to make a decision before 31 January, which is when LightSquared will seek court approval to keep exclusive control of its bankruptcy process.
This exclusive right is currently allowing Harbinger to keep LightSquared’s lenders at bay, while it puts together a reorganisation plan based on the presumed value of its spectrum. At the moment spectrum interference concerns are holding the company back from launching commercial services, but last year it proposed sharing some of the US government’s frequencies to get around this issue.
The venture is still awaiting regulatory approval for the workaround plan in what the lenders have described as a high risk strategy.
