Business

Falcone’s $1B Ergen assault

A battle between billionaire financier Phil Falcone and satellite mogul Charlie Ergen over bankrupt wireless venture LightSquared is about to get ugly.

As LightSquared’s founder, Falcone is mulling a reorganization plan that would seek to compensate all creditors — except for Ergen, The Post has learned.

If Falcone moves forward with the plan, LightSquared would argue before a bankruptcy judge that Ergen shouldn’t be compensated as part of the reorganization because his Dish Network is technically a competitor and, therefore, is in violation of LightSquared’s loan agreement that bans strategic buyers from owning its debt.

If the judge agrees, Ergen could find himself stuck with $1 billion of LightSquared’s debt without an obvious payoff.

Ergen has quietly amassed more than half of LightSquared’s $1.7 billion of secured loans through hedge-fund firm Sound Point, a person with knowledge of the situation told The Post.

The satellite mogul used the hedge fund to make the purchases specifically because of the loan limits on strategic buyers, Ergen has said.

LightSquared has an exclusive deadline of July 15 to submit a restructuring plan. After that, creditors, including Ergen, can put forth a competing plan.

In the meantime, LightSquared’s investment bank, Jefferies Group, has been told to raise just $2.2 billion to repay creditors rather than the $3 billion Falcone initially sought to cover debt and equity holders.

The $2.2 billion figure also includes $200 million in debtor-in-possession financing, a source said.

LightSquared and Jefferies declined to comment, while Dish didn’t return a call for comment.

If the judge nixes Falcone’s $2.2 billion reorganization plan, he will have to scrounge up $3 billion to pay off creditors — or risk losing control of LightSquared to Ergen.

Ergen is expected to counter Falcone’s reorganization plan with his own $2 billion bid for some of LightSquared’s spectrum assets.

The upside to Ergen’s plan is that the secured debt holders, who are owed roughly $1.8 billion including interest, will be repaid immediately, according to wireless expert Tim Farrar.

In contrast, the money being raised by Jefferies for LightSquared is contingent on getting approval from the Federal Communications Commission for a spectrum swap proposal that would allow it to operate a nationwide wireless network. That process could take months, according to Farrar.