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The Deal: LightSquared Lenders Propose Sale

Stocks in this article: DISHUBS

NEW YORK ( The Deal) -- A group of LightSquared Inc. secured lenders have filed a Chapter 11 plan for certain debtor affiliates centered on a $2.22 billion sale to satellite TV mogul Charlie Ergen.

Under the Tuesday, July 23, liquidation plan for 10 debtors led by LightSquared LP, Ergen's L-Band Acquisition Corp., a vehicle of Dish Network (DISH), would be the stalking-horse bidder for substantially all the plan debtors' assets, including four satellites and spectrum holdings. (The plan does not cover holding company LightSquared Inc. and certain other debtors.)

Court papers show rival offers would have to top LBAC's bid by at least $118.6 million. LBAC would receive a $66.6 million breakup fee and up to $2 million in expense reimbursement if it lost at auction.

The lenders have yet to file a bidding procedures motion, but Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan would consider the sale at a confirmation hearing.

Court papers show LBAC on May 15 offered to purchase certain LightSquared LP assets for $2 billion, but the debtor, a Reston, Va., provider of wireless mobile broadband telecommunications services, ignored the offer.

LightSquared Inc. instead requested permission on May 31 to pay Jefferies certain fees related to an exit financing package. Chapman approved the motion on June 7 after the engagement letter was amended to ensure LightSquared owner Harbinger Capital Partners will pay all up-front fees, which could total $80 million.

The LightSquared LP plan, meanwhile, would pay administrative claims in full on the effective date. Priority claims and other secured claims also would be paid in full.

Secured lenders, owed an estimated $2.17 billion, would receive any remaining sale proceeds--after reserving a payment for unsecured creditors and an unspecified amount for the debtors' wind-down--until paid in full.

General unsecured creditors would receive a pro rata share of $10 million, plus any available funds after the payment of secured claims, until paid in full.

Holders of preferred unit interests, owed $235.56 million, would receive any remaining available funds. If the group were paid in full, common equity holders would receive a recovery. LightSquared Inc. indirectly owns the common shares.

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