By Dow Jones Business News,
January 16, 2014, 07:16:00 PM EDT
By Joseph Checkler
Hedge-fund manager Philip Falcone said Thursday he didn't know Dish Network Corp. Chairman Charles Ergen was buying
up LightSquared debt in 2012 and 2013. Mr. Falcone was testifying at a trial to determine whether Mr. Ergen improperly
acquired the debt for Dish and not himself.
In court, Mr. Falcone, whose Harbinger Capital Partners controls 85% of LightSquared's equity, was read emails he
sent in 2012 and 2013 widely speculating who was behind the SP Special Opportunities LLC vehicle that was buying
LightSquared's bank debt at the time. In various messages, Mr. Falcone speculated that Mr. Ergen could be behind the
purchases but also said Carlos Slim, Cablevision Systems Corp.'s James Dolan, AT&T Inc. or others may have been the
buyers. Mr. Falcone said he didn't realize it was definitely Mr. Ergen behind the SP vehicle until May 2013.
LightSquared is suing Dish and Mr. Ergen over his purchases of LightSquared's bank debt, saying he actually bought
it on behalf of Dish, which as a LightSquared competitor was prohibited from buying it. After the purchases, Dish then
made a $2.2 billion offer for LightSquared's wireless spectrum, but dropped the bid last week. Mr. Ergen testified at
the trial earlier this week, and Thursday was Mr. Falcone's turn. Even with the Dish bid gone, LightSquared still wants
to prove the debt purchases were improper, which could allow LightSquared's junior creditors to recover more.
Whether Mr. Falcone and LightSquared knew it was Mr. Ergen making the trades could become central to the case. Mr.
Ergen said earlier this week that he intentionally tried to keep his trades confidential so he wouldn't drive the debt
prices up. LightSquared lawyers have said in court that part of the reason Mr. Ergen kept quiet was because he was
sidestepping the rules and acting in concert with Dish, not for himself.
Mr. Falcone said he didn't find out about Mr. Ergen's trades until just before Dish made its bid last year.
Some emails Mr. Falcone wrote said that rumors about well-known investors like Mr. Slim or Mr. Ergen buying
LightSquared could generate more interest in the company.
A lawyer for Mr. Ergen pressed Mr. Falcone on whether he would have any interest in selling LightSquared before it
receives the regulatory approvals it needs to fully use its wireless network.
"At the appropriate valuation, sure," said Mr. Falcone, who said Harbinger has put between $1.8 billion and $2
billion into the investment.
The lawyer then read a statement from Mr. Falcone's deposition saying he wouldn't sell the company before such
approvals. Mr. Falcone said he made that prior statement with the $2.2 billion Dish bid in mind, and that he thinks the
company's wireless spectrum is worth much more. He has said in the past that the company's spectrum could be worth as
much as $10 billion, a number that came up in court several times Thursday.
Spectrum refers to the limited pockets of airwaves that mobile phone and Internet companies use.
Mr. Falcone has long wanted to build a wireless satellite network so 260 million Americans can have low-cost
cellphone service. LightSquared has been his conduit for that goal.
The longer the company's bankruptcy case goes on, the closer it could be getting to the Federal Communications
Commission approvals it needs to fully deploy its network. Lawyers for Dish and Mr. Ergen have said throughout the case
that Mr. Falcone will do anything to drag the case along so he can keep control of LightSquared as it waits for
"You believe LightSquared is best served remaining in bankruptcy until FCC approval," said Willkie Farr & Gallagher
LLP's James C. Dugan, a lawyer for Mr. Ergen. "No," Mr. Falcone responded.
Mr. Falcone also said he was optimistic that LightSquared would get FCC approval for its network.
"I have a pretty good feeling about what they're going to do," he said.
LightSquared had long opposed the Dish bid and is trying to remain an independent company. It is pushing for a $4
billion restructuring proposal, led by Fortress Investment Group LLC, that it says is better than the now-abandoned Dish
sale and the sale of a smaller swath of the company's wireless spectrum to creditors U.S. Bancorp and Mast Capital
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 several hedge funds.
Those hedge funds had presented the $2.2 billion Dish sale as a reorganization plan for LightSquared and as
recently as a Tuesday bankruptcy-court filing said they still wanted to move forward with that deal. 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.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go
Write to Joseph Checkler at email@example.com
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