Further Mediation Required in Light Squared’s Chapter 11 Bankruptcy Case

U.S. Bankruptcy Judge Shelley Chapman ordered the parties in the Chapter 11 bankruptcy action concerning LightSquared, Inc. back to mediation after earlier this month rejecting the proposed plan for the company to exit bankruptcy. LightSquared is a wireless-spectrum company controlled primarily by hedge-fund owner, Phillip Falcone.


The roadblock that prompted the Judge’s action results from the treatment of Dish Network. As the pay   television industry has faltered in the wake of the proliferation of online video outlets, Dish Network sought to gain access to the spectrum provided by LightSquared to boost its revenue. Dish Network had sought to purchase LightSquared’s airwaves for $2.2 billion at an auction only to withdraw that offer over what it contended was a technical issue. Falcone claims the move by Dish Network constituted a ploy by Dish Network’s chairman, Charles Ergen to mislead his company. Now Dish Network claims to have a $1 billion claim against the Chapter 11 debtor.


While Judge Chapman took issue with the manner in which Dish Network acquired its claim, she faulted the plan presented by Falcone because she thought it addressed other creditor’s claims without fairly considering the claim made by Dish Network. It appears she wants to see a plan which resolves all of the creditor’s claims and does not kick any cans further down the road.


Two different plans which would rely on third-party infusions of capital are under discussion. One plan attempted to get rid of LightSquared’s approximately $1 billion in debt by providing $2.5 billion in financing backed by Fortress, JPMorgan and Melody Capital Advisors LLC. Under this plan, Falcone would become an equity holder in the company. Another plan would be financed merely by 2 of those investors, Fortress Investment Group, LLC and JP Morgan.


The utilization of mediation in Chapter 11 bankruptcy cases is not uncommon. Bankruptcy judges frequently believe a settlement agreed to by the interested parties gives the reorganizing company  a better chance of surviving – and possibly flourishing – after the reorganization via Chapter 11 is complete.


In Albuquerque, Giddens & Gatton Law, PC has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.