Harbinger Offers Last-Minute Plan For LightSquared, Backed By Fortress

Jan 2 2014 | 11:48am ET

Harbinger Capital Management has retaken the lead in the fight over the future of its wireless Internet venture—by four minutes.

The New York-based hedge fund submitted a new restructuring plan for LightSquared just ahead of a 5 p.m. deadline on Christmas eve. The new arrangement includes $1.25 billion in new equity from Fortress Investment Group.

The deal follows a $3.3 billion plan to buy LightSquared out of bankruptcy, financed by Centerbridge Partners, Fortress, Harbinger and JPMorgan Chase. That plan fell apart when Centerbridge backed out—but it allowed LightSquared to cancel a planned auction of its assets at which Dish Network was to be the lead bidder with a $2.2 billion offer.

Under the proposal, Fortress will be paid 12% interest on the LightSquared loan. Melody Partners has also agreed to lend at least $285 million.

Dish wants to buy LightSquared's share of the electromagnetic spectrum, which LightSquared has been barred from using for its planned 4G network. The Federal Communications Commission has cited interference concerns with global positioning systems for the refusal to approve LightSquared's proposal.

Still, it is unclear whether Falcone will be able to pull off the last-minute gambit: The Fortress deal, like the original Centerbridge plan, requires the FCC approve a LightSquared application to swap its spectrum for spectrum that does not interfere with GPS. A decision on that application isn't expected for at least six months. A federal bankruptcy court is expected to rule on Harbinger's plan as soon as this month.

Should Falcone succeed, he is likely to refuse to pay Dish Chairman Charlie Ergen's more than $1 billion in LightSquared debt. LightSquared has sued Ergen for fraudulently buying up the bonds in spite of a clause barring competitors from doing so.

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