LightSquared Disclosure Statement Approved

NEW YORK (The Deal) -- LightSquared on Monday won approval of the disclosure statement for its reorganization plan, setting up what is sure to be a contentious creditor vote on the proposal.

Philip Falcone's wireless carrier faces a fight with its largest creditor, satellite TV tycoon Charlie Ergen, who holds $1 billion or so in secured debt and is dead set against the plan.

Counsel to Ergen, Rachel Strickland of Willkie Farr & Gallagher, called the plan "as brazen an attempt to marginalize a party as I have ever seen," during Monday's court hearing.

With support from Fortress Investment Group, Melody Capital Advisors, Falcone's Harbinger Capital Partners and JPMorgan Chase (JPM), the plan would pay all creditors in full.

However, the proposal breaks secured creditors of the debtor's LightSquared LP unit into two classes: Ergen in one and everyone else in the other. While other LightSquared LP secured creditors get cash payment in full or the option to participate in a new debtor-in-possession loan, Ergen would receive a $1.09 billion, seven-year note that is either third-lien or unsecured and pays interest in kind, rather than cash.

Ergen vehicle SP Special Opportunities would receive better recoveries and legal releases if it votes for the plan.

Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the disclosure statement during the hearing Monday.

Strickland described the third-lien, PIK note as an attempt to "bind us in duct tape and throw us in the trunk of the car" for a "seven-year ride."

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