Jan 6 (Reuters) - A section of LightSquared Inc lenders are opposing the company's decision to seek a new financing arrangement as part of its plan to exit bankruptcy, the latest attack in a highly litigious case involving competing business interests.
In December, LightSquared proposed 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.
The new plan replaced one based on an auction of the company's assets. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.
LightSquared had asked to be allowed to implement the new plan without going back to creditors to get their approval, saying the latest deal increases the recovery for creditors.
However, lenders including US Bank and MAST Capital Management said on Monday that the new arrangement violates an earlier deal, which prohibited LightSquared from seeking alternative financing unless the creditors were first paid in full.
"The Existing Inc DIP Order clearly and unambiguously establishes certain limitations on the conditions under which the debtors may seek new DIP financing," the lender group said in a court filing.
The lender group also asked the court not to permit the new financing arrangement since the existing obligations have not yet been paid in full.
The lender group has asked the federal court to hold LightSquared, its primary shareholder Harbinger Capital, and its prospective financiers Fortress and Melody Capital Advisors, in contempt for allegedly violating the existing Debtor-In-Possession (DIP) order.
The contentious courtroom battle 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.
LightSquared filed for bankruptcy in 2012 after the Federal Communications Commission (FCC) blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.
The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.