Dish Network Corp. Chairman Charles Ergen said that by late 2011 his company didn’t consider LightSquared Inc. an attractive acquisition, while he remained interested in investing personally.
Ergen, testifying today in U.S. Bankruptcy Court in Manhattan, is accused of secretly accumulating $1 billion in LightSquared debt so he could control the broadband services provider’s reorganization and use its wireless spectrum to help Dish expand into wireless.
LightSquared, controlled by Philip Falcone’s Harbinger Capital Partners LLC, sued Ergen and Dish in August seeking to disallow the $1 billion claim. Ergen, who last week sought to drop his bid for some of the company’s airwaves, said today that he saw LightSquared as an opportunity for himself, not Dish.
“From an investment point of view, LightSquared still had valuable spectrum,” he said. “While it might not fit necessarily with Dish, that spectrum could fit with different companies.”
LightSquared said Ergen, 60, blocked attempts to reveal who was behind the debt purchases and knew the credit agreement prohibited competitors such as Englewood, Colorado-based Dish from owning the debt. Ergen’s lawyers have said the billionaire had the right to buy the debt personally and didn’t want his name to be known because it could have driven up the price.
Just before the trial began last week, Ergen moved to withdraw the $2.2 billion offer he made for some of Reston, Virginia-based LightSquared’s airwave assets.
An ad hoc lender group that originally backed Ergen’s offer said today it’s prepared to proceed with reorganization through a potential alternative. The new bid would be valued at $1.2 billion in cash, which would pay the lender group in full and give $10 million to unsecured creditors, according to documents filed in court today.
Falcone has proposed that he hold onto LightSquared, into which he has already sunk $3 billion. He may testify later in the trial.
Dish Treasurer Jason Kiser, who advised on the debt purchases, testified last week that he didn’t consider whether he was acting for the company or Ergen when he first looked into buying the debt in 2011.
LightSquared has said Kiser, who has known Ergen for 27 years, was acting on behalf of Dish when he caused an investment vehicle Ergen controlled to execute its purchases. Kiser said that after lawyers advised him rival companies couldn’t buy the debt, he was acting for Ergen personally.
Ergen testified he heard from Kiser that Dish wasn’t eligible to purchase the bank debt, removing a possible conflict. Ergen said Kiser often helped him with personal investments and wasn’t compensated for those services.
“He likes being in the action,” Ergen said. He referred to the younger executive as a “mentee.” “When he’s doing stuff for me personally, he gets to spend time with me and I think he likes that.”
LightSquared filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion, after the Federal Communications Commission blocked the company’s service, saying it might interfere with civilian and military global-positioning-system navigation equipment.
The company’s own reorganization plan includes $2.5 billion in financing backed by Fortress Investment Group LLC, JPMorgan Chase & Co. and Melody Capital Advisors LLC, and would require regulatory approval.
The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).