By Nick Brown
NEW YORK, Feb 24 (Reuters) – Bankrupt wireless venture
LightSquared can move forward with a restructuring proposal over
the objections of its biggest creditor, Dish Network Corp
Chairman Charles Ergen, a judge said on Monday.
Judge Shelley Chapman approved the framework of a plan at a
hearing in the U.S. bankruptcy court in Manhattan, which means
LightSquared can lobby creditors to support its plan before a
hearing on final confirmation next month. But the company’s
restructuring is still a long way from over.
Ergen contends the plan would treat his claims unfairly,
while LightSquared has argued in a separate lawsuit that Ergen
built up his debt position illegally and that it should be
reduced or wiped out.
Chapman ruled the debate should be left until the
confirmation stage. A final confirmation hearing is due to begin
on March 17. Closing arguments in the lawsuit against Ergen are
set for March 12.
LightSquared filed for bankruptcy protection in 2012 after
the Federal Communications Commission revoked its wireless
license amid concerns that its plan for a broadband network
would interfere with GPS communications.
Ergen, through an investment vehicle, bought a controlling
stake of LightSquared’s senior loan debt for his personal
account.
LightSquared claims the purchases were really made on Dish’s
behalf, contravening a ban on competitors like Dish from owning
LightSquared debt. A Dish unit made a $2.2 billion bid for
LightSquared last year but dropped the bid in January.
Earlier this month, LightSquared filed its restructuring
plan, offering to drop the lawsuit if Ergen would agree to be
repaid with a note that would mature in seven years.
In court on Monday, a lawyer for Ergen likened the offer to
trying “to bind us in duct tape, throw us in the trunk of the
car and take us on a seven-year ride.”
The lawyer, Rachel Strickland, argued that LightSquared
would have to score a complete win in its lawsuit for its
bankruptcy plan to work. “You’re not allowed to propose a plan
that says, ‘When I find that pot of gold at the end of the
rainbow, it’s all going to be fine,'” she said.
Chapman said determining the fairness of the proposal
required discovery and hearings. “I’m not going to say ‘Lights
Out’ on this company today,” she said. “I’m simply not.”
LightSquared’s bankruptcy loan lasts through April 15. A
ruling on the lawsuit against Ergen would not come until
mid-to-late March.
If the court determined that Ergen’s claim was valid,
LightSquared would have to finance a new restructuring plan that
would repay Ergen in cash, or face liquidation.
Strickland said Ergen’s investment vehicle was willing to
provide the company with more financing to fund future
negotiations, but she said LightSquared and its other
stakeholders had no incentive to negotiate while the current
deal was on the table.
