New evidence may affect LightSquared restructuring
NEW YORK, March 20
NEW YORK, March 20 (Reuters) - New evidence may emerge in a dispute between LightSquared and its largest creditor, Dish Network Corp Chairman Charles Ergen, that could affect the bankrupt wireless company's restructuring.
U.S. Bankruptcy Judge Shelley Chapman said at a hearing on Wednesday that she had received a letter the night before that led her to question the "integrity of the record" in a just-completed trial on the dispute over Ergen's purchases of LightSquared debt.
She did not disclose the contents of the letter, but two sources close to the matter said it concerned delays in the closing of the debt purchases.
"I don't know what we're doing at this point," Chapman said. "There needs to be a discussion about whether" to reopen the record in the trial, which ended on Monday.
The trial had centered on whether Ergen improperly acquired $1 billion of the debt to take control of LightSquared's wireless rights.
Chapman, who is presiding over the bankruptcy itself, has not yet issued a ruling in the trial.
LightSquared sued Ergen, proposing that his debt holdings be subordinate to those of other secured lenders when the company exits bankruptcy. Ergen says he bought the debt in a personal capacity.
The sources said the letter concerned LightSquared's allegations that Ergen held up the closing of some of his debt purchases to conceal his identity and frustrate restructuring efforts. That allegation is important for LightSquared, which must convince Chapman that Ergen acted surreptitiously and that his actions hurt the company.
During closing arguments on Monday, Ergen's lawyer, Rachel Strickland, challenged the allegation, telling the court it was Jefferies LLC, the broker on the transactions, that held up the trades. Strickland said Jefferies had imposed a moratorium on closing the transactions until documentation issues were sorted out.
Chapman told Strickland that point had not been raised in the trial.
"I'm reacting to the notion, which I'm hearing for the first time at 5 o'clock today, that there was a moratorium on closing," Chapman said at the time. "If that document exists, I'd like to be pointed to it."
If the letter referenced on Wednesday indeed indicates that Jefferies played a role in the delays, it could help Ergen's case that he did not act improperly. Representatives of Jefferies did not immediately respond to requests for comment.
LightSquared's lawyer, Matthew Barr, said at Wednesday's hearing that he was "very, very troubled" by the letter. "We fully intend to express our views" on it, Barr said. "We will endeavor to do that in the next day or two."
LightSquared, which is controlled by Phil Falcone's Harbinger Capital Partners, declared bankruptcy in 2012, when the U.S. Federal Communications Commission revoked its license to build a wireless network because of concerns that it could interfere with GPS systems. (Reporting by Nick Brown; Editing by Lisa Von Ahn)