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The Deal: Falcone Tries To Take Back LightSquared

Stocks in this article: DISH

NEW YORK (TheStreet) A day after LightSquared opted not to hold a scheduled bankruptcy auction, Philip Falcone's Harbinger Capital Partners filed a new plan to reorganize the would-be wireless broadband provider.

Harbinger asserts that the plan values LightSquared at $5.654 billion, including $2.587 billion in equity value. And Falcone's firm claims there are billions more available in legal claims.

The hedge fund said that Melody Capital Advisors LLC and other lenders have agreed to provide an additional $1.45 billion in exit financing.

The new plan does not, however, address a bid that Centerbridge Partners has reportedly put forward to buy assets for $3.3 billion, or $5 billion including assumed obligations.

LightSquared had scheduled an auction on Wednesday, Dec. 11. The debtor filed a terse statement with the U.S. Bankruptcy Court for the Southern District of New York, which said that a special committee of its board decided not to hold the auction after LightSquared deemed none of the submitted bids "successful."

Even if Centerbridge's $3.3 billion bid were accepted, Wells Fargo Securities LLC analyst Marci Ryvicker suggested that the Light Squared "soap opera" is not over, in a Thursday, Dec. 12, note.

An affiliate of Charlie Ergen's Dish Network (DISH) had submitted a $2.22 billion offer for LightSquared's prime spectrum portfolio.

"There is still a case to be made for DISH to come to the table and provide a higher price (we remind you that DISH had $10.4B of cash and equivalents at 9/30)," Ryvicker wrote.

"Even if Centerbridge is the 'victor', here, we don't see how they monetize the Lightsquared spectrum without involving Charlie in some way," she added. "Particularly because we just don't believe that Lightsquared spectrum can be monetized as efficiently by Centerbridge as it can be by DISH."

Chris King of Stifel, Nicolaus observed in a report that a Centerbridge offer valued at $5 billion, including $1.7 billion in assumed obligations, would value the spectrum at 83 cents per Megahertz per person covered. Dish paid 24 cents per MHz per person in acquisitions of TerreStar and DBSD, King noted.

Centerbridge would also have to win over regulators.

"We suspect regulators will have some wariness, given continuing GPS interference concerns and the potential for a speculative play to flip the spectrum to another buyer for a profit," King wrote.

Disallowing claims held by Charlie Ergen's Sound Point Capital Management is a key part of Harbinger's plan. The hedge fund noted that squashing Ergen's claims, which LightSquared has contested, would add another $1 billion in value to creditors and equity holders.

Harbinger and LightSquared have filed suit in the bankruptcy court challenging Sound Point's purchase of secured claims.

Harbinger also seeks funds through a suit against GPS providers who opposed LightSquared's efforts to deploy a wireless network on its spectrum. The firm estimates that the GPS litigation could yield $6 billion in claims for the estate.

The suit against the GPS providers, also in bankruptcy court, names Deere, Garmin International, Trimble Navigation and GPS industry organizations as defendants.

Dish and Centerbridge declined to comment.

--Written by Chris Nolter in New York

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