LightSquared revised reorganization plan elicits creditor objection

By Kali Hays

New York, Feb. 25 – LightSquared, Inc. creditor Centaurus Capital LP filed an objection to confirmation of the company’s amended joint plan of reorganization on Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

Centaurus claims that the creditor treatment included in the proposed plan “is based on valuations of the various debtors’ assets that are fundamentally flawed and unfair.”

The objection says that while LightSquared’s previous plan could not be confirmed because it included the “overly optimistic” assumption that the FCC would approve its pending license requests, the modified plan is “overly pessimistic” as it “is based on the unrealistic assumption that the debtors will not seek and obtain any of the FCC approvals and modifications of the debtors’ spectrum licenses.”

In addition, Centaurus takes issue with the plan’s combination of the LightSquared Inc. and LightSquared LP assets as the entities “have distinct sets of creditors and interest holders,” and the creditor claims that the amended plan provides windfalls to plan sponsors, violating the prohibition against creditors receiving more than full recovery.

As previously reported, sponsors of the plan include Harbinger Capital Partners, LLC, SIG Holdings Inc. Fortress Investment Group LLC and Centerbridge Partners LP, all of which will receive preferred stock in a reorganized LightSquared.

Centaurus said that the amended plan is not fully consensual and that with a “proper valuation” conducted by the court, it will find that the proposed plan “inaccurately reflects the combined debtors’ going concern value and inappropriately confers a disproportionate amount of that value on the new investors at the expense of the holders of existing LP preferred units, existing Inc. preferred stock and existing Inc. common stock and should not be confirmed,” according to the objection.

A hearing to confirm the reorganization is scheduled for March 9.

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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