SPSO blasts LightSquared Chapter 11 plan claims subordination attempt

By Caroline Salls

Pittsburgh, March 17 - SP Special Opportunities, LLC (SPSO) objected to LightSquared Inc.'s plan of reorganization, according to a March 15 filing with the U.S. Bankruptcy Court for the Southern District of New York.

SPSO said the plan violates more applicable Bankruptcy Code provisions than it satisfies.

"The plan's consensus, which the debtors will champion as though it obviates all of the statutory confirmation standards, is nothing more than a pay-off to all parties-in-interest by stepping into the court's shoes and subordinating (or, more accurately, disallowing) the claims of its largest secured creditor," the objection said.

SPSO said Harbinger and other stakeholders "established a fragile alliance out of a common desire to enrich themselves at SPSO's expense."

According to the objection, discovery has revealed that there was never any intent to negotiate with SPSO, but simply an assumption that SPSO would be subordinated, with no analysis of what would happen if there was no subordination.

"The debtors ask this court to do something it cannot: confirm a plan that reroutes value to junior interest holders by circumventing a senior, secured creditor," SPSO said.

"Unable to raise sufficient outside financing for a plan that would allow them to (legally) retain their interests, and refusing to provide financing themselves on anything but a senior secured basis, these stakeholders came up with a simple solution: force SPSO to provide the loan that no one else would."

SPSO said this was accomplished by exchanging its first-lien claims for an out-of-the-money, silent third-lien or unsecured debt instrument.

"If they're looking for bad faith, the debtors should look in the mirror first and then at the plan sponsors pulling the strings," SPSO said in the objection.

The plan confirmation hearing is scheduled for Wednesday.

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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