%1

Efforts to cap the amount of interest due to U.S. bondholders of Nortel Networks Ltd. are a "blatant attempt" to "subvert" the priority of debtholders in bankruptcy cases, Nortel's U.S. bondholders argue in new legal filings, Dow Jones Daily Bankruptcy Review reported today. Canada's Globe and Mail reported an ad hoc group of U.S. bondholders and debenture trustees filed court submissions on Tuesday, arguing that they deserve to be paid the contractual amount of interest that has accrued on $4.1 billion (U.S.) of outstanding bonds since Nortel filed for bankruptcy protection in 2009 — an amount estimated to be worth $1.6 billion and climbing.

Spanish wireless networks provider Gowex filed for bankruptcy yesterday, a week after an accounting fraud at the firm was revealed, while the Spanish High Court said its founder could face a jail sentence of more than 10 years, Reuters reported yesterday. Law firm Velez & Urbina said Gowex had decided to file for bankruptcy because it was in a state of "imminent insolvency" and faced a "financial standstill" after a high number of contracts were ended and new projects were cancelled. Former Chief Executive and Chairman Jenaro Garcia Martin said on July 6 that he had misrepresented the financial accounts for at least the last four years. Last week he was charged with false accounting, distortion of economic and financial information, and insider trading.

Philip Falcone’s LightSquared Inc. settled a fight with Dish Network Corp. Chairman Charles Ergen over more than $1 billion in debt he holds in the bankrupt wireless broadband company, taking it one step closer to exiting court protection, Bloomberg News reported yesterday. Details of a new chapter 11 plan will be filed within a week, Joshua Sussberg, a lawyer for a special committee of LightSquared, told Bankruptcy Judge Shelley Chapman at a court hearing yesterday. A dispute between the company and Ergen, its one-time suitor, scuttled a prior plan to reorganize. The deal with Ergen, which has yet to be completed, “will alleviate a significant burden and execution risk around the plan,” Sussberg said.

Philip Falcone’s Harbinger Capital Partners LLC filed a $2 billion lawsuit against the U.S., two years after the Federal Communications Commission refused to approve the wireless broadband service of his now-bankrupt LightSquared Inc., Bloomberg News reported on Saturday. The U.S. reneged on a March 2010 commitment under which Harbinger agreed to invest billions of dollars to build a network to government specifications, the New York-based investment firm said in a complaint yesterday in the U.S. Court of Federal Claims in Washington. LightSquared filed for bankruptcy in 2012 after the FCC declined to approve its service, saying that it might interfere with global positioning systems. Harbinger, which controls LightSquared for now, is seeking recovery of its $1.9 billion investment, along with unspecified damages, according to a copy of the complaint provided by a lawyer for Harbinger.

Harbinger Capital Partners has sued Dish Network Corp. and its Chairman Charles Ergen, seeking at least $1.5 billion for allegedly trying to strip the hedge fund of its control of bankrupt wireless company LightSquared, Reuters reported yesterday. The lawsuit filed in a Colorado federal court on Tuesday accused Ergen of engaging in fraud and of violating a federal anti-racketeering law, according to court documents. Harbinger controls LightSquared, which has been mired in chapter 11 bankruptcy since 2012, and Ergen is LightSquared's largest creditor.

In the wake of an accounting scandal at Spanish Wi-Fi provider Let's Gowex SA, cities around the world are scrambling to figure out whether deals they have with the company to create hot spots will still go ahead, the Wall Street Journal reported today. Officials in cities from Dublin to Dubai signed deals with Gowex to create hot spots or boost connectivity in parks and neighborhoods. Over the weekend, Gowex admitted to falsifying its accounts and said that it would file for bankruptcy protection. New York City's Economic Development Corp., which signed a deal for Gowex to provide 60 hot spots throughout its five boroughs, has reached out to Gowex representatives, but discussions have been inconclusive, spokesman Ian Fried said yesterday. The group has spent $185,000 of $245,000 it had allocated to a Gowex contract, he said.

Bankrupt wireless venture LightSquared on Tuesday revealed a new restructuring proposal that would cede 74 percent of its equity to a new investor group that includes JPMorgan Chase & Co., Cerberus Capital Management and Fortress Investment Group, Reuters reported yesterday. Phil Falcone's Harbinger Capital Partners, which now controls LightSquared, would retain about 12.5 percent of the new equity, according to Joshua Sussberg, a lawyer for a committee overseeing LightSquared's restructuring efforts. JPMorgan, Cerberus and Fortress would supply $1.45 billion in new liquidity, with other investors in the group chipping in another $300 million. Existing lenders with around $1 billion in debt would be repaid in cash.

Lawyers for James Merrill, the president and co-owner of TelexFree who is under house arrest awaiting trial on fraud charges, are requesting the release of more than $4 million from frozen bank accounts to fund his legal defense, Dow Jones Daily Bankruptcy Review reported today. Merrill and his partner, who authorities say fled to Brazil, stand accused of running a massive pyramid scheme and face criminal wire-fraud charges in Massachusetts, where their now-bankrupt company is based. In papers filed Tuesday with the U.S. District Court in Worcester, Mass., defense attorneys said that based on the magnitude of the alleged crime, the release of about $4.2 million held in four bank accounts is essential to Merrill's ability to fully defend himself.

LightSquared Inc., Philip Falcone’s wireless broadband company, agreed on tentative terms of a reorganization plan that would give majority ownership to JPMorgan Chase & Co. (JPM), Fortress Investment Group LLC and Cerberus Capital Management LP, Bloomberg News reported yesterday. Falcone’s Harbinger Capital Partners LLC would retain a small stake under the plan, which will work only if LightSquared exits bankruptcy by Sept. 30, Joshua Sussberg, a lawyer for a special LightSquared committee, told Bankruptcy Judge Shelley Chapman yesterday. The agreement was reached in mediation following a dispute with creditor Charles Ergen over how his $1 billion in debt would be treated. The plan would be financed with a $1.3 billion first-lien credit facility and the investment of $1.75 billion in new money, Sussberg told Chapman. Cerberus, Fortress and JPMorgan would end up with 74 percent of LightSquared’s new common equity and Harbinger would have 12.5 percent, Sussberg said.

An investment group that owns a piece of a major telecom firm in the Republic of Georgia filed for bankruptcy in a U.S. court on Monday, facing a deadline to pay more than $11 million to noteholders, Dow Jones Daily Bankruptcy Review reported today. MIG LLC, which operates as Metromedia International Group Inc., filed for chapter 11 protection in Wilmington, Del., blaming a dispute that stopped the flow of profits from its only major investment: a 46 percent stake in the ownership group that owns telephone provider Magticom Ltd.