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Cerebus, Solus Bid For Ergen's LightSquared Debt

 Cerberus Capital Management LP and Solus Alternative Asset Management LP sprung a proposal Tuesday to buy $950 million in LightSquared Inc. debt held by billionaire Charlie Ergen, the bankrupt broadband wireless concern's largest single creditor, before Ergen's expert downplayed LightSquared's value at a Chapter 11 trial.

Solus counsel Robert J. Stark of Brown Rudnick LLP announced the proposal, which has Ergen's support, on the morning of a new day of testimony before Manhattan Bankruptcy Judge Shelley C. Chapman, who is trying to determine whether LightSquared's reorganization plan is fair to creditors.

The latest proposal, meanwhile, would yield to Cerberus and Solus new debt in a reorganized LightSquared, as well as slightly more than 34 percent of new common stock. Stark said the proposal would see Cerberus and Solus “step into the shoes” of Ergen and his SP Special Opportunities LLC investment vehicle, a move that would quiet one of the largest obstacles to closing out a contentious bankruptcy.

Counsel for a special committee of LightSquared lenders, Joshua A. Sussberg of Kirkland & Ellis LLP said he would have to review the new pitch.

After that the day was consumed by Ergen's expert, Jim Millstein of Millstein & Co., who testified that valuation reports commissioned by LightSquared heavily overvalue the debtors.

Millstein labeled a report by Moelis & Company LLC that prices LightSquared's spectrum assets at between $2.5 billion and $4.9 billion — and possibly much higher — as a huge stretch based on “simplified assumptions.”

If there were any faith at large in the Moelis report “there would be people piling in the doors to bid on these assets,” Millstein said. “Somebody would walk in the door and write a check and pay off the senior debt.”

His comments drew an immediate objection from LightSquared counsel Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP.

Millstein's testimony began after Judge Chapman declined a bid by LightSquared to disallow it — but warned that doubts about Millstein's qualifications were not entirely illegitimate and would go to the weight of his words if not their admissibility.

Millstein was set to be cross-examined by LightSquared attorneys on Wednesday.

Other experts in the trial have countered Millstein's jaded opinion of LightSquared's value with highly technical and more optimistic assessments of their own.

"It's a huge collection of valuations I've had coming through this room," Judge Chapman said.

Overvaluing LightSquared could allow it to raise more new debt, which could become problematic in the future — even paving a path back into bankruptcy — if the assets don't prove that lucrative.

Solus is represented by Robert J. Stark, Jacob T. Beiswenger, Steven B. Levine, Sunni P. Beville, James W. Stoll, Jonathan D. Marshall and Brian T. Rice of Brown Rudnick LLP.

Cerberus is represented by Adam C. Harris of Schulte Roth & Zabel LLP.

Ergen's investment vehicle is represented by Rachel C. Strickland, Tariq Mundiya, James C. Dugan and Norman P. Ostrove of Willkie Farr & Gallagher LLP.

LightSquared is represented by Matthew S. Barr, Alan J. Stone, Michael L. Hirschfeld and Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP. LightSquared’s 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. et al., case number 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.