By Joseph Checkler
A bankruptcy judge on Wednesday said Dish Network Corp. properly
withdrew its $2.2 billion bid for LightSquared's wireless spectrum
assets, rejecting an argument by LightSquared's lenders that Dish
was still required to close the deal.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan
said that while Dish never officially filed paperwork withdrawing
the offer, its termination of an agreement with those lenders based
on the bid was sufficient.
"It was permissible for LBAC to withdraw the bid," said Judge
Chapman, referring to the Dish subsidiary that made the offer for
LightSquared.
Earlier in the hearing, the judge told Dish lawyer Rachel
Strickland that she should have made a filing notifying the lenders
that the offer itself was off the table, not just the
agreement.
"We can do that by handing them a Post-it Note," said Ms.
Strickland, of Willkie Farr & Gallagher LLP. She pointed out
that Dish repeatedly said in court earlier in January that the bid
was withdrawn.
The lenders, a group of hedge funds that had presented a
restructuring plan for LightSquared based on the Dish bid, argued
that the absence of an official withdrawal of the bid binds Dish to
the deal. White & Case LLP's Thomas E. Lauria, a lawyer for the
hedge funds, said it was "incomprehensible" that Dish was walking
away.
"I've never heard of anything like this," Mr. Lauria said. He
said his group is prepared to appeal, and the judge said that would
be allowed.
Judge Chapman said of the agreement, "A bunch of tired lawyers
wrote down words that didn't precisely reflect what the deal
was."
After hearing arguments, the judge closed her courtroom to the
public to have an off-the-record conference with lawyers for Dish,
LightSquared and the lenders over "scheduling matters" and
discovery issues regarding the disagreement. Such closed
proceedings, otherwise unusual in bankruptcy court, have become a
hallmark of the judge in Lightsquared's bankruptcy and her other
cases.
Dish had said all along that its bid was the best option for
LightSquared because it isn't subject to the regulatory approvals
LightSquared's plan needs. Still, when Dish walked away from the
bid earlier in January, it cited undisclosed "technical" issues
with regulators as a reason.
LightSquared has said it favors its own $4 billion restructuring
proposal led by Fortress Investment Group LLC, which it says is
superior to 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. U.S. Bank and Mast still plan to push forward
with their plan at a hearing originally scheduled for later this
week, but now pushed back to early February.
In a bankruptcy court filing last week, the Federal
Communications Commission said it isn't sure whether it would
approve LightSquared's network by the end of 2014.
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 a vehicle controlled by Dish Chairman
Charlie Ergen, as well as the hedge funds trying to push the Dish
deal through. LightSquared's equity is controlled by Philip Falcone
and his Harbinger Capital Partners hedge-fund firm.
It is unclear whether Dish has walked away for good or whether
it will make a new offer for the spectrum. Dish has been
accumulating spectrum for years, both in and out of bankruptcy
court. Spectrum refers to the limited pockets of airwaves that
mobile phone and Internet companies use.
LightSquared filed for bankruptcy protection in May 2012, after
federal regulators refused to clear the company's plans to launch a
wireless network, which they said could interfere with
global-positioning systems.
Write to Joseph Checkler at joseph.checkler@wsj.com
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