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LightSquared based on its now-withdrawn offer for the company's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 filing.
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 million.
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 deal through.
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 joseph.checkler@wsj.com
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