LightSquared equityholder Harbinger appeals denial of claim removal

By Kali Hays

New York, Nov. 13 – LightSquared Inc. equityholder Harbinger Capital Partners, LLC filed an appeal of a bench decision denying its motion to expunge the guaranteed claim of LightSquared LP lenders in its competing reorganization plan, according to a Nov. 13 notice with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, judge Shelley Chapman issued the Oct. 30 opinion supporting the objection of the LP lenders related to the removal of the claim.

The LP lenders objected to the Harbinger plan on Oct. 8, claiming that Harbinger “never once has been willing to back up its value assertions,” though it claims “the collateral under the prepetition LP facility is worth several times the amount of the prepetition LP facility claims.”

Confirmation of Harbinger’s plan is conditioned upon the court expunging the LP lender claim or estimating the claim at zero.

In its motion, Harbinger argued that the LP lender claim will be “paid in full” under its amended plan through a proposed surrender of 100% of its equity interest in LightSquared GP and LightSquared LP to the LP lenders, a value it says exceeds that of the claim, meaning the claim should be removed.

Judge Chapman said in her bench opinion that even if the LP lenders did receive the equity interests Harbinger is proposing, “there are numerous risks and uncertainties related to the value of such equity” and “those risks are properly borne by equity holders, not secured lenders.”

Judge Chapman went on to say that if the value Harbinger is offering to the LP lenders is in fact sufficient to pay the LP lenders’ claim, “it could simply allow the claim in the plan in its full face amount” instead of “inappropriately shifting downside risk to secured creditors that is properly borne by equity.”

A separate court notice cancelled a case status conference set for Friday. A hearing on LightSquared’s motion to stay other Harbinger litigation is scheduled for Dec. 11.

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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