LightSquared Inc. said it will ask a judge not to count a “no” vote on its bankruptcy reorganization plan cast by a fund controlled by Dish Network Corp. Chairman Charles Ergen, saying the fund acted in bad faith.
The fund, SP Special Opportunities LLP, owns $1 billion of debt in LightSquared, the wireless broadband company controlled by Philip Falcone’s Harbinger Capital Partners LLC. LightSquared has accused Ergen of secretly accumulating the debt so he can buy the company’s airwaves for a below-market price through bankruptcy.
“SPSO’s rejection of the plan is in furtherance of its strategy -- executed in concert with Ergen and his other controlled companies -- to acquire LightSquared at a steep discount to its fair value by preventing LightSquared from reorganizing on a standalone basis,” according to the filing.
U.S. Bankruptcy Judge Shelley Chapman on Feb. 24 approved the terms of a reorganization plan, which was then sent to creditors for a vote. The plan values LightSquared at $7.7 billion and doesn’t hinge on regulatory approval for airwaves that are its main asset. A denial of such approval pushed the company into bankruptcy in 2012.
LightSquared, based in Reston, Virginia, also said it obtained new documents two days ago that remove any doubt as to Ergen and SPSO’s “ulterior motives.” References to what the documents, dated July 2013, contain were obscured in the court papers.
SPSO has objected to the plan, which would treat its debt differently depending on how it voted. The plan is scheduled to go before Chapman for final approval March 17, and LightSquared asked her to disqualify Ergen’s vote at the outset of that hearing.
LightSquared is scheduled to wrap up the trial of its lawsuit against Ergen on March 12. The company alleged that Ergen bought debt through SPSO while obscuring his involvement. The purchases were improper because Ergen was acting on behalf of Englewood, Colorado-based Dish, his satellite-TV company, and competitors are prohibited from owning LightSquared’s debt, according to the complaint.
Ergen was accused of seeking to manipulate the outcome of the bankruptcy through the “blocking position” he built up in LightSquared debt, by using it to buy assets on the cheap and drive away other bidders.
Ergen has said he was acting personally, not for Dish, in buying the debt and made no “false representations” about his investment.
LightSquared filed for bankruptcy in May 2012 after the Federal Communications Commission blocked its service, saying it might interfere with global-positioning-system navigation equipment. The current plan anticipates LightSquared gaining first FCC approvals by the end of 2015.
The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).