LightSquared: Competitor's acquisition focus hinders plan negotiations

By Caroline Salls

Pittsburgh, July 1 - LightSquared Inc. objected to a motion from an informal group of LightSquared LP lenders to enforce an order extending its exclusivity and asked the court to relieve it from some "untenable" obligations included in the extension order, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Instead of being given the opportunity to use the extended exclusive periods to negotiate a plan of reorganization with stakeholders, LightSquared said it "has been presented with an enigma - a shifting body of stakeholders in which the economic interestholders were impossible to discern, clandestine holders emerged and trades were mysteriously held open for months."

The company said its ability to negotiate a consensual plan of reorganization has been "severely hampered."

According to the objection, Dish Network Corp. and EchoStar Corp. controlling shareholder Charles W. Ergen is focusing on acquiring LightSquared and its spectrum out of bankruptcy.

"Such focus has dramatically changed the major players and events in LightSquared's Chapter 11 cases since LightSquared was last before the court at the second exclusivity hearing - all to the detriment of LightSquared and its stakeholders," the company said.

Specifically, the company said that Ergen-controlled investment vehicle SP Special Opportunities, LLC surreptitiously purchased the bulk of pre-bankruptcy LP obligations and attempted to purchase the bulk of series A preferred units of LightSquared LP.

As a result, LightSquared said the informal lenders' committee, with whom it negotiated the exclusivity extension, "has been reduced to holding voting authority for just 29.7% of the prepetition LP obligations, if Mr. Ergen's holdings are excluded."

Solely to preserve the exclusivity extension order, the company said SP is now a member of the informal group, which is now directly controlled by LightSquared competition Ergen.

"Ergen is incentivized to pay as little as possible to acquire LightSquared's assets, while all of LightSquared's other stakeholders - including those with whom LightSquared negotiated the second exclusivity extension order - are incentivized to maximize LightSquared's value," the company said.

A hearing is scheduled for July 16.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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