LightSquared's Prospects Dim

NEW YORK ( The Deal) -- A group of LightSquared secured lenders is trying to block Charlie Ergen's exit from a $2.2 billion asset purchase agreement.

The creditors called Dish Network's (DISH) attempt to terminate its purchase of spectrum and other assets "a desperate attempt to evade the clear and unambiguous language" of a court order, in pleadings filed Monday.

The Philip Falcone-backed wireless telecom group is low on cash, and scrambling to fund its exit from Chapter 11 protection. While LightSquared has lined up limited debtor-in-possession financing to pay for its reorganization, it has received news from regulators that would complicate its reorganization.

Dish agreed to buy spectrum and other assets of the debtor's LightSquared LP unit in July. Creditors of LightSquared LP proposed a plan to reorganize the unit based on proceeds from the deal.

Ergen's satellite TV company said in recent weeks that it will terminate the purchase because the creditors did not meet deadlines, such as obtaining court approval for their plan by Jan. 7.

The creditors argue that Judge Shelley Chapman's October order on auction rules locks in Dish until Feb. 15. LightSquared called off the auction in late 2013, when a special committee did not find the bids acceptable and chose to pursue other options.

The dispute comes as LightSquared is "essentially out of cash and teetering on the verge of administrative insolvency," the creditors said.

The telecom is attempting to finance a reorganization plan that would keep the company intact. Fortress Investment Group LLC, JPMorgan Securities LLC, Melody Capital Advisors LLC and Falcone's Harbinger Capital Partners would back the plan.

The Federal Communications Commission filed a notice with the bankruptcy court Friday stating that it may not be able to rule on LightSquared's standalone plan by the end of 2014, which is a condition of the Fortress-backed plan.

"We don't see how the latest Fortress proposal gets done with this new development," Marci Ryvicker of Wells Fargo Securities LLC wrote in a Tuesday report. Aside from the timing, LightSquared's plan would requite input from other federal agencies.

"We ultimately believe Charlie will end up with the Lightsquared assets - how this actually happens is the big unknown," Ryvicker wrote.

Judge Chapman is considering the plans from the debtor, the LightSquared LP creditors and creditor Mast Capital Management LLC.

She is also hearing a suit that Harbinger and LightSquared filed against Ergen, arguing that the satellite TV mogul improperly purchased debt of the bankrupt telecom and imperiled its reorganization.

LightSquared estimates that the plan confirmation hearing will last until February, if not longer.

A group of the LightSquared LP creditors agreed to provide the company with a debtor-in-possession loan, pleadings filed Saturday state.

Capital Research Management Co., Cyrus Capital Partners LP, Fir Tree Partners and Intermarket Corp. would loan the debtor $33 million, carrying annual interest of 15%, which can be paid in kind.

The loan matures on April 15, 2014, but could come due earlier under some circumstances. It would mature on the funding date of the LightSquared LP plan, if the creditors succeed. If the debtor confirm's it's standalone plan, the debtor-possession loan would mature 15 days after the order.