Centerbridge Quits LightSquared Bailout

Dec 18 2013 | 3:41pm ET

Private-equity firm Centerbridge Partners has backed out of a deal to invest in LightSquared, throwing the fate of the Harbinger Capital Management-backed wireless Internet venture into doubt once again.

Centerbridge was to be the lead investor in a $3.3 billion deal to buy LightSquared out of bankruptcy. It was to be joined by Harbinger, Fortress Investment Group and JPMorgan Chase in staving off a $2.2 billion offer from Dish Networks, which covets LightSquared's share of the electromagnetic spectrum.

But concerns about that spectrum, which last year forced Harbinger to put LightSquared into bankruptcy, also led to Centerbridge's renege. The p.e. firm's bid was conditioned on federal regulators—which have barred LightSquared from using its spectrum due to interference concerns—agreeing to a spectrum swap. But Centerbridge became concerned that such a swap was not on the horizon and that LightSquared would cost a lot of money in the interim.

At a bankruptcy-court hearing yesterday, a LightSquared lawyer said that Centerbridge had quit the deal "for economic and noneconomic reasons."

Still, Centerbridge may have played a key role in saving LightSquared for Harbinger: Its bid allowed LightSquared to cancel a planned auction last week at which Dish was to be the lead bidder. LightSquared said yesterday that it plans to continue to pursue a bankruptcy exit without Centerbridge.

"The architecture of the transaction essentially remains in place," Paul Basta, a lawyer for a special committee of LightSquared's board, said.

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