513 B.R. 56
Bankr. S.D.N.Y.2014Background
- LightSquared filed for Chapter 11, operating as a debtor in possession with no trustee or committee appointed.
- The Third Amended Joint Plan classifies claims into sixteen classes, including Class 7A (non-SPSO) and Class 7B (SPSO).
- SPSO is the sole holder in Class 7B, with its claim traced to LP debt; SPSO opposes confirmation.
- Plan design seeks to subordinating or separate SPSO’s claim, designate SPSO’s vote, and confirm under cramdown despite objections.
- Plan relies on FCC license modification timing and NOAA spectrum swaps, with valuation of spectrum assets guiding feasibility.
- Confirmation hearing featured extensive testimony on technical, regulatory, and valuation issues, including Moelis, Ergen, PWP, and Hyslop analyses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Separate classification of SPSO claim under 1122(a) | SPSO should be separately classified as a non-creditor interest | Plan proponents justify separate classification due to SPSO's competitor status and non-creditor interests | Permissible with rational justification; not compelled to combine with 7A |
| Designation of SPSO’s vote under 1126(e) | Debtors seek designation for SPSO’s vote | SPSO acted with non-creditor interests as a competitor; designation warranted | SPSO’s vote cannot be designated; designation denied |
| Plan’s treatment of Class 7B under 1129(b) fair and equitable | Plan provides indubitable equivalent and non-discriminatory treatment | SPSO note is not indubitable equivalent; plan discriminates unfairly | Plan not fair and equitable for Class 7B; cramdown not appropriate |
| Equitable subordination of SPSO Claim | Plan relies on equitable subordination to justify treatment | Equitable subordination not proven as basis for plan | Equitable subordination granted as to extent; further proceedings to determine extent |
Key Cases Cited
- In re DBSD North America, Inc., 421 B.R. 133 (S.D.N.Y. 2009) (basis for bad-faith voting and designation limits (DBSD))
- In re DBSD North America, Inc., 634 F.3d 79 (2d Cir. 2011) (designating a bad-faith vote; strict standard for designation)
- In re Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988) (fair and equitable cramdown standards)
- In re Premiere Networks Servs., Inc., 333 B.R. 130 (Bankr. N.D. Tex. 2005) (competitor creditor separate classification; non-creditor interests)
- In re 500 Fifth Ave. Assocs., 148 B.R. 1010 (Bankr.S.D.N.Y. 1993) (limits to separate classification; gerrymandering concerns)
- In re Adelphia Communications Corp., 368 B.R. 140 (Bankr.S.D.N.Y. 2007) (example of separate classification and non-dispositive motives)
- In re Dune Deck Owners Corp., 175 B.R. 839 (S.D.N.Y. 1995) (mixed-motive voting considerations)