By Joseph Checkler
NEW YORK--Hedge-fund manager Stephen Ketchum on Wednesday said
he couldn't recall if Dish Network Corp. 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 LightSquared treasurer and Mr.
Ergen's confidante Jason Kiser about what it would take to own a
blocking position.
"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 million.
Phil Falcone of Harbinger Capital Partners, which controls
LightSquared's equity, is scheduled to testify later Wednesday 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 Groug LLC
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.
Write to Joseph Checkler at joseph.checkler@wsj.com
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