LightSquared headed to mediation after plan denial, lawsuit ruling

By Caroline Salls

Pittsburgh, May 28 - LightSquared Inc. and several parties to its Chapter 11 case were ordered to participate in mediation on the structure of a plan of reorganization for the LightSquared debtors, the amount of subordination and the treatment of SP Special Opportunities LLC (SPSO)'s claim against LightSquared LP, the allocation of estate value among various constituencies and other plan confirmation issues.

According to the order filed May 28 with the U.S. Bankruptcy Court for the Southern District of New York, Judge Robert D. Drain will serve as mediator.

In addition to issues arising in the LightSquared Chapter 11 cases, the mediation will also focus on an adversary proceeding originally filed by Harbinger Capital Partners in August 2013. The original complaint was dismissed, but Harbinger filed an amended complaint, and the LightSquared debtors intervened in that case.

The adversary proceeding defendants were SPSO, Dish Network Corp., EchoStar Corp. and Charles W. Ergen.

On May 8, the court made a ruling in the adversary proceeding that SPSO's claim against LightSquared LP will be equitably subordinated in an amount to be determined after further proceedings and denied claims for tortious interference and disallowance of SPSO's claim.

In addition, the court denied confirmation of LightSquared's plan of reorganization.

After issuing its decisions, the court ordered the parties to work together to attempt to reach a resolution on all plan issues and on the amount of equitable subordination.

Since no resolution had been reached as of May 27, mediation was ordered. The results of the mediation will be non-binding, according to Wednesday's order.

As previously reported, LightSquared alleged that SPSO and Dish Network conspired on a scheme to force the company to sell its assets to Dish at a discount.

SPSO objected to LightSquared's plan in March, claiming the plan violated more applicable Bankruptcy Code provisions than it satisfied.

"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."

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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