By Dow Jones Business News,
January 15, 2014, 03:43:00 PM EDT
(Updates with new date for Falcone testimony in the 12th paragraph)
By Joseph Checkler
NEW YORK--Hedge-fund manager Stephen Ketchum on Wednesday said he couldn't recall if Dish Network Corp. ( DISH )
Chairman Charlie Ergen wanted to acquire a powerful "blocking" position in LightSquared's debt even though evidence
presented to him showed he knew that Mr. Ergen did.
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.
Mr. Ketchum, whose Sound Point Capital Management executed Mr. Ergen's trades, was asked by a LightSquared lawyer
about when it became clear Mr. Ergen wanted a blocking position, which could qualify him to propose and/or block a
reorganization plan for LightSquared. Mr. Ketchum at one point said he didn't know but was then read emails in which he
advised Dish Network's treasurer and Mr. Ergen's confidante Jason Kiser about what it would take to own a blocking
"I'm just chipping away at our goal of getting to the blocking position," Mr. Ketchum said in one of the emails to Mr.
Kiser, read by a lawyer.
"I want to take this opportunity to remind you that you are obligated to make truthful answers," Judge Shelley C.
Chapman told Mr. Ketchum at one point. He responded, "I understand that, your honor."
Mr. Ergen testified earlier this week that acquiring a blocking position was indeed a goal of his, but the timing of
that goal could become crucial in the case. LightSquared wants to show that the decisions Mr. Ergen made were part of a
concerted effort to gain control of LightSquared debt to make it easier for Dish to buy the company.
Dish last year offered $2.2 billion for LightSquared's wireless spectrum assets. Spectrum refers to the limited
pockets of airwaves that mobile phone and Internet companies use.
While Dish dropped that bid last week, LightSquared still wants to prove the debt purchases were illegal, which would
allow other creditors to get more money back.
On the stand Wednesday, Mr. Ketchum appeared to frustrate lawyers and Judge Chapman by repeatedly saying "I don't
recall" details of his dealings with Mr. Kiser, who ordered the trades executed by Sound Point. Mr. Ketchum runs Sound
Point, which manages $4.2 billion in assets.
LightSquared's lawyer also asked Mr. Ketchum about why he referred to Mr. Ergen's investment vehicle, SP Special
Opportunities LLC, as " Echostar" in internal Sound Point emails. Echostar Corp. was spun off from Dish, and is also
controlled by Mr. Ergen.
"It was just easy to refer to them that way," Mr. Ketchum said. Whether Mr. Ergen, Dish and Echostar were acting as
one is a key point of contention and could sway the case in LightSquared's favor. Mr. Ergen testified earlier this week
that he spent about $700 million of his own money to acquire the LightSquared debt, which is now worth more than $850
Phil Falcone of Harbinger Capital Partners, which controls LightSquared's equity, is set to testify Thursday in what
has become one of the higher-profile trials in recent bankruptcy history.
In its main bankruptcy case, LightSquared is pushing for a $4 billion restructuring proposal-led by Fortress
Investment Group LLC ( FIG ) that it says is better than the now-abandoned Dish sale and a sale of a smaller swath of the
company's wireless spectrum to creditors U.S. Bancorp and Mast Capital Management.
Both the Dish sale and LightSquared plans would have paid off the holders of more than $1.8 billion in LightSquared
bank debt, a group that includes Mr. Ergen's SP 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 filing said they still wanted to move forward with that deal. It's unclear whether Dish has walked away for
good or whether it will still make an 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 to
Write to Joseph Checkler at firstname.lastname@example.org.
Corrections & Amplifications
This item was corrected at 7:40 p.m. ET to reflect that Jason Kiser is Dish Network's treasurer, not LightSquared's
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