JPMorgan Agreement Could Mean Nearing End of LightSquared Bankruptcy
JPMorgan Chase agreed to put its interest in post-bankruptcy LightSquared into a proxy, which would clear the path for the FCC to approve a transfer of licenses, the last thing LightSquared needs before U.S. Bankruptcy Court approves its final emergence from Chapter 11 reorganization, LightSquared counsel Gerard Waldron of Covington & Burling told us Monday. The filing posted Friday in docket 15-126 said the bank agreed RL2 Investors Holdings or another of its affiliates will hold its minority, noncontrolling equity interests in reconstituted LightSquared.
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That proxy would hold JPMorgan's interests from the effective date and consummation of the LightSquared reorganization plan through the termination of the agreement; that date was not specified in the draft voting proxy agreement filed with the agency. During that time, according to the agreement, neither JPMorgan and its agents and attorneys nor the proxy outfit will be involved in LightSquared's management or operation. That includes JPMorgan having no voting or management rights regarding the proxy, or the ability to require the proxy to consult with it, and the voting proxy being barred from consulting with JPMorgan, the draft agreement says.
The Dec. 15 deadline for having LightSquared's emergence plan finalized is five weeks away, according to court paperwork. The FCC didn't comment.
Use of a proxy sidesteps what had been a sticky issue: JPMorgan's $550 million settlement announced in May with the Justice Department and Federal Reserve on its foreign currency exchange business, a felony antitrust violation (see 1507060031). A felony conviction is among the issues the FCC considers in its analysis of a party’s character qualifications for holding licenses. In meetings with agency staff and multiple ex parte filings in recent weeks, JPMorgan has tried to make its case that the antitrust violation shouldn't disqualify it from ownership. "JPMC has undertaken extensive remedial actions and is continuing the process of strengthening its internal controls to help prevent such conduct from reoccurring," it said in an October filing. It also said its "decade-plus track record as a significant interest-holder in FCC license-holding companies provides additional support for its character to hold FCC licenses." JPMorgan also tried to distance itself from the antitrust activity: "The DOJ Agreement did not implicate senior management. Rather ... the antitrust violation arises principally from the conduct of one former JPMC trader." Use of such proxies in license transfers is relatively pro forma, one communications lawyer told us.
The DOJ in September said it had no objection to the license transfer, as long as that approval contains conditions agreed to by LightSquared in its agreement with Justice. That agreement largely involves national security and law enforcement issues and not JPMorgan ownership.