(Recasts with mediator's comments; adds detail from mediator's
report, background on LightSquared's dispute with Ergen)
By Nick Brown
NEW YORK, June 27 Wireless venture LightSquared
has reached a deal to end its Chapter 11 bankruptcy, but its
largest creditor, satellite operator Charles Ergen, is not on
board and "wasted the parties' time," according to a report from
the court-appointed mediator.
The mediator, Judge Robert Drain, said he believed the plan
would be confirmable by the Bankruptcy Court judge overseeing
the case even without Ergen's support.
Drain's report, made in a court filing on Friday, did not
give details on the deal.
LightSquared, which is owned by Phil Falcone's Harbinger
Capital Partners, had accused Ergen of using underhanded methods
to acquire his controlling stake of its debt. The dispute was
sent to mediation after Judge Shelley Chapman rejected a
restructuring proposed by LightSquared that would have pushed
Ergen's repayment behind other creditors'.
Drain, a colleague of Chapman in U.S. Bankruptcy Court in
New York, in his report said that Ergen and his investment
vehicle "have not participated in the mediation in good faith
and have wasted the parties' and the mediator's time and
Ergen's lawyer, Rachel Strickland, did not return a call
According to Drain's report, Ergen sent his wife to one of
the three mediation sessions held this month in New York and
left another without Drain's permission. Drain called Ergen's
behavior "unique," even "in a field where parties are known to
assert their positions aggressively and sharp elbows ... are
LightSquared earlier this month told Chapman it was mulling
a deal premised on new financing from a third party. The company
will appear in court on Tuesday to update Chapman on
LightSquared went bankrupt in 2012, after the Federal
Communications Commission revoked its license to build a massive
planned wireless network over fears of interference with GPS
Harbinger, which held most of the company's equity, had
hoped for a restructuring that would allow it to retain control.
But Ergen slowly accumulated about $1 billion of its senior loan
debt, essentially giving him veto power over any plan he
LightSquared accused him in a lawsuit of concealing his
identity to get around a credit agreement that barred
competitors like Dish from owning company debt. LightSquared
said the debt buys were a scheme to wrest control of the company
on Dish's behalf, which Ergen denied, insisting it was a
Falcone and other Harbinger appointees resigned from
LightSquared's board earlier this month.
LightSquared's long and litigious case has not had any
heroes. During a trial in May over LightSquared's accusations,
Chapman ruled that Ergen had indeed acted surreptitiously,
citing his "troubling pattern of non-credible testimony." But
Chapman also said that Harbinger's proposal to subordinate
Ergen's debt was an illegitimate ploy to punish him rather than
"It is difficult to imagine discrimination that could be
much more unfair than that contemplated" by Harbinger, she said.
(Reporting by Nick Brown in New York and Tom Hals in
Wilmington, Delaware; Editing by Leslie Adler)