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LightSquared Files New Plan to Keep Ergen Away: The Deal

NEW YORK (TheStreet) -- Philip Falcone-backed wireless telecom LightSquared Inc. will ask a bankruptcy judge on Monday, Dec. 30, for permission to amend its reorganization plan without re-soliciting votes from creditors.

LightSquared filed a stand-alone reorganization plan on Christmas Eve, with support from Fortress Investment Group LLC, JPMorgan Chase & Co., Melody Capital Advisors LLC and Falcone's Harbinger Capital Partners LLC.

The financing underlying the plan is part of Falcone's efforts to keep LightSquared intact, and out of the hands of Charlie Ergen, CEO of Dish Networks (DISH - Get Report). The revised plan contains a $2.5 billion senior secured exit facility, a $250 million senior secured loan and at least $1.25 billion in new equity contributions. The deal came shortly after a refinancing deal with Centerbridge Partners LP fell apart.

An affiliate of Dish has submitted a $2.22 billion offer for the assets of the LightSquared LP unit, which includes the debtor's most attractive wireless spectrum licenses. LightSquared has been unable to deploy a wireless broadband network on the licenses because of interference with GPS signals that transmit on nearby wavelengths.

The Federal Communications Commission initially backed a waiver that would allow LightSquared to provide wholesale services. The agency withdrew its support in early 2012, however, amidst opposition from GPS providers, The Department of Defense and others who argued that LightSquared's transmissions would disrupt positioning systems.

Uncertainty about LightSquared's ability to reach a spectrum deal with the FCC has complicated efforts to raise financing or sell its assets. A strong point in favor of Ergen's bid is that Dish would buy the assets without approval from the FCC.

LightSquared's new backers have conditioned the plan on FCC approval of the debtor's application to modify its application to use spectrum. Melody Capital Advisors would provide $285 million or more in debtor-in-possession financing to repay a prior DIP loan and to fund operations while the debtor awaits approval.

The regulatory scrum has intensified in recent days. FCC Chairman Thomas Wheeler and senior staff members met with LightSquared officials, new investors and others on Dec. 19 to discuss the review, according to agency filings.

Reed Hundt, a former FCC Chairman, represented LightSquared at the meeting. The entourage included LightSquared Chairman and CEO Doug Smith; independent board members Alan Carr, Chris Rogers and Neal Goldman, and their counsel Paul Basta of Kirkland and Ellis LLP; Fortress co-Chief Investment Officer Dean Dakolias, and vice president Jack Neumark; JP Morgan Managing Director Patrick Daniello and debtor's counsel Matthew Barr of Milbank, Tweed, Hadley & McCloy LLP, among others.

Not to be outdone, a group of GPS industry figures met with FCC staffers a day later. Counsel for Trimble Navigation Ltd., Garmin International Inc. and Deere & Co. discussed interference with FCC strategic planning and policy analysis chief Jonathan Chambers and other staff.

LightSquared says its plan will fully repay all equity holders and creditors, with the exception of Ergen. The satellite TV mogul has purchased LightSquared claims through a personal investment vehicle. Harbinger and LightSquared have argued that Ergen skirted rules that prevent competitors from buying its secured debt.

Judge Shelley Chapman will consider LightSquared's request for streamlined consideration of its revised plan at a Monday hearing in the U.S. Bankruptcy Court for the Southern District of New York.

Because it is improving the payouts to creditors, LightSquared suggested that it should be able to update the plan without soliciting new votes from creditors. Alternatively, the debtor suggested a Dec. 30 deadline for votes and objections to the new plan. LightSquared advisor Moelis & Co. values the reorganized company at $8.4 billion, based on the latest plan. The valuation does not include proceeds of legal actions against GPS providers or Ergen.

Harbinger has estimated that litigation against GPS companies could yield $6 billion in proceeds for the estate, and that disallowing Ergen's claims would add $1 billion in value to creditors.

--By Chris Nolter in New York

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