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JPMorgan, Fortress, Cerberus Back New LightSquared Plan

LightSquared Inc. on Tuesday announced a new bankruptcy exit plan backed largely by JPMorgan Chase Bank NA, Fortress Investment Group LLC and Cerberus Capital Management LP that would pay creditor and frequent opponent Charlie Ergen, the chairman of Dish Network Corp., $470 million in cash.

The latest proposal came after the telecommunications company participated in court-ordered mediation sessions with majority shareholder Harbinger Capital Partners LLC, lenders, and Ergen, who holds around $1 billion in secured debt through his investment vehicle SP Special Opportunities LLC. Ergen and LightSquared have been at war throughout much of the bankruptcy.

Under the terms of the new plan, LightSquared would raise a $1.3 billion first-lien facility in the debt market and bring in another $1.75 million in new money investments. JPMorgan, Fortress and Cerberus will provide $1.45 billion of that new money and take over 74 percent of the reorganized entity. Harbinger would hold onto 12.5 percent of the new equity and $175 million on second-lien debt. It is not clear who would take the remaining 13.5 percent of the new entity.

Non-Ergen lenders would be repaid in full in cash at a 3 percent discount in exchange for being paid out by Sept. 30 and provide $30 million in debtor-in-possession financing. Ergen, through SPSO, would receive $470 million in cash and a $492 million note.

Lawyers for LightSquared and its special independent committee said the plan, if approved, would go into effect Sept. 30. LightSquared would still have to go to trial with Ergen to determine how much of his debt will be subordinated under the plan and to secure confirmation of its new plan.

U.S. Bankruptcy Judge Robert D. Drain, who presided over the mediation throughout June, said in a report released Friday that he believes the terms of the new plan are adequate even though Ergen has not signed on. He also noted that Ergen was not cooperative during the negotiations.

It's possible that the two sides will come to terms in the coming weeks, as Judge Drain has offered to continue overseeing negotiations, but there is no guarantee that will happen.

LightSquared already went through two trials before U.S. Bankruptcy Judge Shelley C. Chapman earlier this year. In May, she ruled in one trial that Ergen's claims would be partially subordinated as a result of his shady acquisition of the debt.

She also rejected LightSquared's request to confirm a plan backed by Harbinger, Fortress and JPMorgan, but instead of Cerberus included Melody Capital Partners LP as the fourth name. She rejected the plan's treatment of Ergen — which would pay him in full over the course of seven years — on the grounds that it relied too heavily on federal regulatory approval to license certain wireless spectrum.

LightSquared's lawyers will file a formal plan later this month and aim for a trial at the end of August.

LightSquared entered bankruptcy in May 2012 with $4 billion in debt. The company's Chapter 11 proceedings have been peppered with unexpected twists and turns and intensely contentious interactions among LightSquared and Ergen.

LightSquared is represented by Matthew S. Barr, Alan J. Stone, Michael L. Hirschfeld and Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP.

Harbinger is represented by David M. Friedman, Adam L. Shiff, Daniel A. Fliman and Matthew B. Stein of Kasowitz Benson Torres & Friedman LLP.

Ergen and SPSO are represented by Rachel Strickland, James C. Dugan and Matthew Freimuth of Willkie Farr & Gallagher LLP.

The special committee is represented by James H.M. Sprayregen, Paul M. Basta and Joshua A. Sussberg of Kirkland & Ellis LLP.

The case is In re: LightSquared Inc., case number 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.