LightSquared Says Ergen Ordered Icahn to Force Bankruptcy

Philip Falcone’s LightSquared Inc. said Dish Network Corp. (DISH) Chairman Charles Ergen ordered billionaire Carl Icahn to help force LightSquared into bankruptcy in 2012 as part of a scheme to gain control of its wireless spectrum.

Ergen initiated the scheme in late 2011, months before the Chapter 11 filing, LightSquared said in papers filed yesterday in U.S. Bankruptcy Court in Manhattan. LightSquared made the allegations after a trial over purchases of its debt by SP Special Opportunities LLP, a fund owned by Ergen.

Ergen knew in May 2012 that Icahn, who had just agreed to sell $247 million of LightSquared debt to SPSO, intended to vote in favor of forbearance on the debt, LightSquared said. That would have given LightSquared more time to pursue an agreement with lenders out of court. Ergen, as the buyer, had the option of allowing Icahn to vote as he wished, LightSquared said.

“But Ergen was eager to have Dish get its hands on LightSquared’s spectrum assets, and, with that unique competitor’s perspective, issued instructions to vote against the forbearance, so as to force a bankruptcy and accelerate a possible sale of the spectrum,” LightSquared said in yesterday’s filing.

Icahn didn’t immediately return a call seeking comment on LightSquared’s allegations. Rachel Strickland, a lawyer for Ergen and SPSO, and Danielle Johnson, a spokeswoman for Englewood, Colorado-based Dish, also didn’t immediately return calls for comment.

Ergen Bid

A separate Ergen-affiliated fund made a $2.22 billion bid to acquire the LightSquared spectrum after the company filed for bankruptcy. LightSquared sued Ergen last year claiming SPSO was acting on behalf of rival Dish and bought the debt in an improper attempt to control its bankruptcy case.

Ergen has since withdrawn the bid and has objected to the way his $1 billion in claims against LightSquared will be treated under a proposed reorganization plan. U.S. Bankruptcy Judge Shelley Chapman approved terms of the plan yesterday. A hearing on final approval is set to begin March 17.

The plan values LightSquared at $7.7 billion and doesn’t hinge on regulatory approval for using the airwaves that are its main asset.

LightSquared sought court protection after the Federal Communications Commission blocked the company’s wireless service, saying it might interfere with civilian and military global-positioning-system navigation equipment. The company listed assets of $4.48 billion and debt of $2.29 billion.

The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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