By Dow Jones Business News,
January 17, 2014, 04:11:00 PM EDT
By Joseph Checkler
NEW YORK-- Dish Network Corp. said a plan to restructure LightSquared based on its now-withdrawn offer for the
company's assets should be considered completely off the table despite the efforts of hedge funds to keep it alive.
Dish's Thursday filing with U.S. Bankruptcy Court in Manhattan comes as LightSquared continues arguing at a trial
that Dish Chairman Charles Ergen improperly bought LightSquared's bank debt---the same class of debt owned by the hedge
funds--on behalf of Dish. As a LightSquared competitor, Dish is prohibited from buying that debt.
In the filing, Dish lawyers said the hedge-fund group shouldn't be allowed to present a restructuring proposal
based on Dish's bid. Those hedge funds said in a filing earlier this week that they may sue Dish for trying to abandon
the deal. They say that while Dish walked away from the agreement surrounding its $2.2 billion bid for LightSquared's
spectrum assets, it didn't formally withdraw the offer itself. Dish, in its Thursday filing, said the actual termination
of the agreement legally allows it to walk away.
"The litigation threatened by the [hedge funds] is designed to create leverage for a bankruptcy estate in crisis
where no leverage otherwise exists," lawyers for the Dish subsidiary that bid on LightSquared, LBAC, said in their
Even with the Dish bid gone, LightSquared and its controlling shareholder, Philip Falcone's Harbinger Capital
Partners, have pressed their case over the purchases. If they win, Mr. Ergen's purchases could be canceled and more
junior creditors could see greater recoveries in the case. Mr. Ergen earlier this week testified that he paid nearly $
700 million for the debt out of his own pocket using his own investment vehicle, and that it's now worth around $850
In that testimony, Mr. Ergen said the reason he tried to keep his 2012 and 2013 purchases of the LightSquared debt
confidential was to not drive up the prices of the bonds. LightSquared and Harbinger have said that he kept it private
to circumvent the debt-buying rules regarding Dish, as Dish prepared its bid.
Mr. Falcone testified on Thursday that he wasn't aware Mr. Ergen was the one behind those purchases until May 2013,
just before Dish made its offer. He also said Dish's offer undervalued LightSquared and thinks the company will get the
regulatory approvals it needs to fully deploy its network. Such approvals could make the company's spectrum much more
valuable. Spectrum refers to the limited pockets of airwaves that mobile phone and Internet companies use.
A LightSquared financial adviser testified at the trial on Friday, as well as a Dish vice president who called Mr.
Ergen's purchases "a private, personal investment matter." Judge Shelley C. Chapman, LightSquared's bankruptcy judge,
hasn't said when she'd rule.
Before testimony began Friday, lawyers for LightSquared, the group of hedge funds and Dish met in a private
chambers conference with Judge Chapman. Later, the judge allowed LightSquared to enter into a "commitment letter" with
J.P. Morgan Chase & Co. and Credit Suisse Group A.G., which are arranging $2.5 billion in financing that would allow
LightSquared to exit bankruptcy.
That financing is part of a $4 billion restructuring led by Fortress Investment Group LLC that LightSquared has
said is better than the Dish deal and the sale of a smaller swath of the company's wireless spectrum to creditors U.S.
Bancorp and Mast Capital Management.
Both the abandoned Dish sale and LightSquared plans would pay off the holders of more than $1.8 billion in
LightSquared bank debt, a group that includes Mr. Ergen's vehicle, as well as the hedge funds trying to push the Dish
It is unclear whether Dish has walked away for good or whether it will make a new offer for the spectrum.
LightSquared filed for bankruptcy protection in May 2012 after federal regulators refused to clear the company's
network plans, which they said could interfere with global-positioning systems. Dish's bid was less contingent on
regulatory approvals than the LightSquared proposal, which Dish had touted as a reason its proposal was superior.
Write to Joseph Checkler at email@example.com
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