Pressure Growing on FCC to Re-engage on LightSquared

Chapman has before her a plan filed last week to bring in at least $1.25 billion in new equity and $2.75 billion in loans to get the company out of bankruptcy. The plan is backed by Fortress Investment Group, Harbinger Capital Partners, JPMorgan Chase and Melody Capital Partners. Meanwhile, Dish Network bid $2.2 billion for LightSquared last summer.

Chapman also set Jan. 9 as the trial date to decide the legality of how the LightSquared debt was purchased by Dish Chairman Charlie Ergen, said a satellite industry executive who’s closely monitoring the process. Because of the bankruptcy timeline and the Jan. 9 hearing and trial, the stand-alone plan from Fortress, JPMorgan and Melody is dependent on FCC approval, the exec said. For it to be successful, the FCC needs to grant LightSquared’s license modification, which proposes to share 1675-1680 MHz spectrum with the National Oceanic and Atmospheric Administration, the executive said.

On Dec. 18, lawyers for the LightSquared Special Committee met with FCC Chief of Staff Ruth Milkman and Jonathan Chambers, chief of the FCC’s Office of Strategic Planning and Policy Analysis. Among those in the room were representatives of Fortress and JPMorgan and former FCC Chairman Reed Hundt, representing LightSquared. A day later representatives of the special committee, along with representatives of the investors and LightSquared CEO Doug Smith, met with Milkman and FCC Chairman Tom Wheeler.

"In these meetings, the private sector meeting attendees provided a status update on LightSquared’s bankruptcy cases, outlined a proposed restructuring, discussed the relationship of those cases and their schedule to ongoing LightSquared proceedings before the Commission, and urged that ... modification applications be granted in a timely manner,” said an ex parte filing on the meetings (http://bit.ly/1aiTjM1).

"A lot of the spectrum swapping that LightSquared has proposed has not been given any sort of thumbs down by the government,” said a lawyer who’s following the case closely, but does not work for any of the principals. “It’s not a matter of if there will be some swapping, it’s a matter of when.” Harbinger lawyers have been telling the judge a decision is “imminent” while Dish lawyers have been saying a decision is “a long ways out,” the lawyer said. “Will the government be able to send a signal in time to the bankruptcy judge” is the key question, the lawyer said. “The bankruptcy judge is getting very impatient with everybody. She just wants to dispose of this case, get it off her docket."

"This is going down to the wire,” predicted Jeff Silva, analyst at Medley Global Advisors. “LightSquared has made significant progress on a number of levels in past months. At this critical juncture, the FCC is the key to LightSquared having a chance of emerging restructured from bankruptcy with essential spectrum assets. With every day that passes, time -- not Dish -- becomes the biggest enemy of LightSquared."

LightSquared’s proposal to emerge from bankruptcy could be problematic, said Tim Farrar, independent analyst. “If the FCC didn’t act, then everything would fall apart and there would be no way to raise the money to execute the plan,” Farrar said. “Everything is contingent upon a whole set of conditions being met. ... There are no guarantees.” Farrar predicted Chapman would be reluctant to reject Dish’s cash bid “which is essentially non-contingent, rather than allowing an undefined nine or 12 months process to continue with no certainty at the end of it.”(hbuskirk@warren-news.com),