By Joseph Checkler
NEW YORK--A bankruptcy judge on Wednesday suggested Dish Network
Corp. properly withdrew its $2.2 billion bid for LightSquared's
wireless spectrum assets, seemingly 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 probably sufficient.
However, the judge didn't officially make a ruling before
closing the hearing to the general public. Only key lawyers for
LightSquared, Dish and the lenders were allowed to stay after
that.
During the open session, 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. Ms. Strickland
represents LBAC, the Dish subsidiary that bid on LightSquared. She
pointed out that Dish repeatedly said in court earlier this month
that the bid was withdrawn.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 if the Dish bid is
terminated.
Judge Chapman said of the agreement, "A bunch of tired lawyers
wrote down words that didn't precisely reflect what the deal
was."
Judge Chapman said early in the hearing that she planned to make
a tentative ruling, but she later told the parties she wanted to
have an off-the-record conference with them 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.
As of Wednesday afternoon, it was unclear when Judge Chapman
would rule.
Dish had said all along that its bid was the best option for
LightSquared because it isn't subject to all the regulatory
approvals LightSquared's plan needs. Still, when Dish walked away
from the bid earlier this month, 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 later this week.
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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