LightSquared Inc. on Monday settled its dispute with lenders and a Dish Network Corp. Chairman Charlie Ergen-owned vehicle over auction procedures for a LightSquared subsidiary’s assets with the hope that a buyer will be finalized by the end of the year.
The deal keeps the $2.22 billion offer from Ergen’s L-Band Acquisition Corp. on the table, which senior lenders had worried might be withdrawn if it weren’t selected as the stalking horse bidder for the auction. It also allows Harbinger Capital Partners LLC, the Philip Falcone-controlled hedge fund that owns LightSquared, to potentially select another buyer for the valuable wireless spectrum assets or move forward with its own Chapter 11 plan outside of the auction.
At a hearing before U.S. Bankruptcy Judge Shelley C. Chapman, attorneys for LightSquared presented proposed procedures for a late November auction that will allow interested buyers to bid under an asset purchase agreement proposed by LBAC and another proposed by U.S. Bank NA and MAST Capital Management LLC for a smaller group of assets. Judge Chapman said she would approve the procedures.
“We’re giving everybody the option to bid under whatever contract they want to bid under,” Matthew Barr of Milbank Tweed Hadley & McCloy LLP, representing LightSquared, said. Potential buyers may bid for whatever portion of the assets they want and Harbinger may offer a bid as well.
LBAC and MAST are considered qualified bidders at the auction and LBAC will serve as a backup bidder if another buyer is selected but the transaction falls through. If LightSquared’s independent committee overseeing the sale process selects a bidder other than LBAC, LBAC is entitled to a breakup fee of 2 1/3 percent of the final transaction price, or at least $51.8 million. That fee could be bumped up to 3 percent.
Judge Chapman also signed off on the appointment of a third member of the independent committee. Christopher Rogers, a former senior vice president for Sprint Nextel Corp., will round out the board after LightSquared failed to get its previous nominee for the spot approved because of an allegedly tumultuous history with Dish.
Rogers and the other members of the committee will each receive $35,000 per month through December and $25,000 per month from January on.
LightSquared is still in the process of obtaining approval from the Federal Communications Commission for use of certain wireless spectrum.
Last month, Harbinger launched a $4 billion suit against Dish and Ergen, saying they fraudulently schemed to prevent Harbinger from maintaining control of LightSquared. The hedge fund contends Ergen and his company deprived Harbinger of its investment in and control of LightSquared and its valuable wireless spectrum, and misappropriated the spectrum assets at a discount to their true value.
LightSquared entered bankruptcy in May 2012, hours before time ran out to renegotiate terms of its $1.7 billion debt. The wireless startup listed $4.48 billion in assets and $2.29 billion in liabilities in its voluntary Chapter 11 petition in the face of a congressional probe and an investor suit after its plans to build a nationwide 4G network ran afoul of telecom regulators.
LightSquared is represented by Matthew S. Barr, Alan J. Stone, Andrew M. Leblanc and Karen Gartenberg of Milbank Tweed Hadley & McCloy LLP.
The lenders are represented by Glenn M. Kurtz, Andrew C. Ambruoso, Thomas E. Lauria and Matthew C. Brown of White & Case LLP.
The independent special committee is represented by Paul Basta and Joshua Sussberg of Kirkland & Ellis LLP.
L-BAC is represented by Rachel Strickland and James C. Dugan of Willkie Farr & Gallagher LLP.
The case is In re: LightSquared Inc., case No. 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.