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Fortress backs new LightSquared bankruptcy exit plan

By Tom Hals and Liana B. Baker

(Reuters) - LightSquared is proposing a new bankruptcy exit plan with financing from Fortress Investment Group and other backers, as the U.S. wireless communications company seeks to avoid a sale to highest bidder Dish Network Corp.

LightSquared would receive $2.75 billion in fresh loans and at least $1.25 billion in equity investment from private equity firms Fortress and Melody Capital Advisors LLC, as well as JPMorgan Chase & Co and Harbinger Capital Partners, court documents filed late Tuesday show.

Harbinger, billionaire Philip Falcone's hedge fund, is LightSquared's controlling shareholder.

The investment firms' participation highlights the fierce competition for wireless spectrum, or broadband frequencies, in the United States. Many U.S. mobile operators are buying spectrum to boost their networks as customers use more and more bandwidth-hungry data services on phones and tablets.

The plan, filed in Manhattan's U.S. Bankruptcy Court, replaces one based on an auction of the company's assets earlier this year. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.

It is unclear whether Dish would try to outbid the new group of investors. A Dish spokesman declined to comment on the company's plans on Thursday.

Dish Chairman Charlie Ergen has been acquiring billions of dollars worth in wireless airwaves to diversify his satellite television business, and has been battling Falcone for control of the company. Falcone had sued Ergen for illegally trying to take control of LightSquared, alleging that Ergen had made improper trades and violated a key credit agreement by buying up about $1 billion of LightSquared's debt in secret.

That case was thrown out in October but LightSquared has sued Ergen in an effort to revive the case.

Wunderlich Securities analyst Matt Harrigan said Dish is likely to bow out, but Ergen's wireless plans are far from over.

"This was not unexpected but I have to believe that Ergen really wanted LightSquared. It would have been nice for Dish to use that spectrum," Harrigan said.

He added that Dish is still involved in a government auction for additional spectrum and could try to acquire T-Mobile as well.

SoftBank is in talks to buy T-Mobile early through its investment in Sprint, Reuters has reported. Dish is also said to be exploring a bid for carrier T-Mobile, and regulators say that tie-up would face much less regulatory scrutiny than a Sprint bid.

FCC APPROVAL NEEDED

The latest proposal is subject to approval of LightSquared's license application by the Federal Communications Commission, which could take many months.

LightSquared would borrow at least $285 million from Melody to cover the period between court's approval of the new plan, which could come as soon as January, and the FCC approval.

LightSquared filed for bankruptcy last year after the FCC blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.

In November, LightSquared sued GPS industry leaders including Garmin International Inc for reneging on representations to LightSquared that its network would not interfere with global positioning systems devices.

U.S. Bankruptcy Court Judge Shelley Chapman ordered a hearing on LightSquared's motion to modify its reorganization plan for 10 a.m. EST Monday.

LightSquared argued it should be allowed to implement the new plan without going back to creditors to get their approval because the latest deal increases the recovery for creditors.

A hearing to confirm LightSquared's proposed plan is scheduled for January 9.

The company's assets would be worth $8.4 billion, assuming the plan goes into effect on September 30 and the FCC approves the company's license, the documents show.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.

(Reporting by Tom Hals in Wilmington, Delaware and Liana B. Baker in New York; Editing by Leslie Gevirtz and Richard Chang)

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