LightSquared Inc. got an offer from hedge fund Solus Alternative Asset Management LP to buy $500 million of a loan held by Dish Network Corp. chairman Charles Ergen, who is opposing the bankrupt broadband wireless venture’s reorganization plan.
Solus, which earlier put forth a rival bankruptcy plan for LightSquared, said it was encouraged instead to suggest improvements to the company’s own proposal, its fifth effort to exit court protection. The hedge fund said it would pay Ergen in cash and invest an additional $89.5 million in LightSquared, taking 34.3 percent of its stock.
Hedge-fund manager Philip Falcone of Harbinger Capital Partners LLC has tried to build a wireless company for about 10 years. His control of LightSquared would be cut to about 44.5 percent with voting restrictions in the current plan, which a judge is reviewing at a week-long hearing. Solus said it wouldn’t interfere with his stake.
Ergen, a satellite-TV pioneer who has told analysts he wants to expand in the wireless realm, is LightSquared’s biggest creditor, with $1.3 billion in loans.
The Reston, Va.-based broadband venture has accused Ergen of dragging out the bankruptcy for almost three years. It plans to demote him from a senior lender and give him less of a claim on assets. He could take some cash from a $400 million pool LightSquared set up to buy more support from lenders.
LightSquared might easily get rid of the Dish chairman by buying his loan, if there was enough value in the company, a lawyer for Ergen told a judge this week. In Ergen’s view, LightSquared is worth about half of the $9.6 billion that one of its advisers told the judge was “the right value.”
Values and division of spoils are big topics in court this week. Airwaves currently owned by Dish have more than quadrupled in value in just a few years, the LightSquared adviser said.
Neither Ergen nor Falcone would get a board seat at the new company, the judge was told. Lender Fortress Investment Group LLC would appoint two directors; JPMorgan Chase & Co. and Centerbridge Partners LP would each choose one, said LightSquared CEO Doug Smith.
Smith said he didn’t know what LightSquared’s equity would be worth and didn’t think he’d asked the company’s advisers to value it. Solus, however, is offering to kick in $589.5 million for a little over a third of the new company’s stock. The hedge fund said its stake would be the same as the equity interests being handed to Fortress and Centerbridge.
LightSquared filed for bankruptcy in 2012 after regulators blocked Falcone’s bid to start a wireless network, saying it might interfere with Global Positioning System equipment.
Ergen’s lawyer counted nine reorganization plans so far, including four from stakeholders such as Solus. Ergen opposed the last plan and doesn’t like the current one, which treats creditors unlawfully and leaves LightSquared unable to service its debt, his lawyer said.
