By Dow Jones Business News,
February 28, 2014, 04:55:00 PM EDT
NEW YORK--LightSquared's bankruptcy judge on Friday ordered Dish Network Corp. to turn over emails with specific
search terms from Chairman Charlie Ergen and other Dish employees to a group of hedge funds fighting Mr. Ergen's status
as a LightSquared creditor.
Judge Shelley C. Chapman said Dish must turn over documents with the letters "LS," for LightSquared, and several
versions of the word "terminate" from April 2013 until now. The judge turned down the hedge funds' request for other
searches, including the words "auction" and "bid" related to Dish's $2.2 billion offer for LightSquared's spectrum
assets abandoned earlier this year.
Dish lawyer Brian T. Frawley of Sullivan & Cromwell LLP said the company didn't think anything provocative would be
turned up in the emails but complained about the process of the search.
"I'm worried about wasting the time reviewing a lot of documents," Mr. Frawley said. Judge Chapman responded, "Can't
help you with that."
The fight between the hedge funds and Mr. Ergen, once allies in the case, has escalated since Dish abandoned its bid.
Later in the hearing, Dish argued over its own requests for discovery, saying it needs documents with more than 100
terms from LightSquared.
Along with LightSquared, the hedge funds are trying to prove that Mr. Ergen bought LightSquared debt improperly on
behalf of Dish, a competitor that was prohibited from buying it. They say the purchases were part of a "scheme" to gain
control of the debt to make it easier for Dish to buy LightSquared. If successful, Mr. Ergen's claims in the case could
be disallowed or pushed behind those of other creditors. LightSquared is also trying to get its latest reorganization
plan approved by the court, a proposal that would theoretically pay Mr. Ergen in full for his $850 million in debt
owned, but give him a "third-lien" note rather than cash. The hedge funds, who own a large chunk of that bank debt,
would get cash under the plan.
The new LightSquared restructuring proposal, backed by Fortress Investment Group LLC, is scaled down from a $4 billion
Fortress-led reorganization that LightSquared abandoned earlier. It calls for a $1.65 billion loan while the company is
in bankruptcy proceedings and then a fresh $1 billion loan to finance the company once it exits Chapter 11.
The new plan isn't contingent on regulatory approval, a key difference between this and the prior Fortress-led
proposal. Therefore, the plan requires less funding because LightSquared would emerge from bankruptcy proceedings much
sooner than under the prior one.
Phil Falcone's Harbinger Capital Partners, which currently controls LightSquared, would participate in the new
financing and retain an equity stake. Harbinger would own about 36% of LightSquared's equity if this proposal gets
LightSquared filed for protection from creditors in May 2012 after federal regulators refused to clear its plans to
launch a wireless network, which they said could interfere with global-positioning systems. Its previous proposals all
were contingent on the Federal Communications Commission approving modifications to LightSquared's network, which the
agency has said isn't imminent.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Joseph Checkler at email@example.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2014 Dow Jones & Company, Inc.