(Refiled for additional reporter credit)
By Nick Brown and Billy Cheung
NEW YORK, March 26 Dish Network Corp Chairman
Charles Ergen, the largest creditor of bankrupt wireless company
LightSquared, said on Wednesday he believed LightSquared could
be worth as much as $8.9 billion if it gained regulatory
approval of its planned wireless network.
Testifying in U.S. Bankruptcy Court in New York, Ergen faced
tough questions from LightSquared lenders who believe he had
visions of effecting a Dish takeover at a lowball price. But
Ergen said both he and Dish believed the company was worth a lot
of money, and that Dish has gone forward with a $2.2 billion bid
proposed last year, if not for a technical issue that forced it
to walk away.
LightSquared, owned by Phil Falcone's Harbinger Capital
Partners, went bankrupt in 2012, when the Federal Communications
Commission revoked its license to operate spectrum out of
concern it could interfere with GPS systems. Ergen then acquired
about $1 billion of the company's senior loan debt, giving him a
controlling stake in LightSquared's capital structure.
His motivations for amassing the debt are crucial to weeks
of court hearings in which LightSquared is seeking court
approval of a bankruptcy exit plan that would subordinate
Ergen's claims. Whether Ergen is deemed by Judge Shelley Chapman
to have acted improperly will be the key factor in whether
Chapman approves the plan.
A group of other LightSquared lenders, along with
LightSquared itself, have alleged that Dish revoked its $2.2
billion bid for the company in January after no competing bids
were filed at auction, in hopes of making a lower offer in the
Ergen has blamed pulling the bid on a "technical issue," the
nature of which has not been publicly discussed.
In Wednesday's testimony - the second time he has been
compelled to testify in the case - Ergen said Dish was prepared
to go forward with the bid if not for the technical concerns. He
added that Dish may have been willing to increase the bid to
$2.4 billion but did not have authorization from its board.
Dish, said Ergen, valued LightSquared at between $2.3
billion and $5.4 billion, while Ergen personally believed its
spectrum would be worth between $5.17 billion and $8.9 billion
to Dish, assuming FCC approval.
LightSquared's bankruptcy exit plan would subordinate
Ergen's claims, repaying them in the form of a note ranking
behind the other lenders, who would be paid in cash. Harbinger
would also retain some equity in LightSquared.
The lenders on Wednesday made their case for why the plan is
fair, implying through a harsh line of questioning that Ergen
effectively pulled a bait-and-switch, initially earning the
lenders' support for Dish's bid, then dropping the bid when he
realized Dish could get the company for less.
The lenders last year advanced a restructuring proposal
largely premised on a Dish bid, then unsuccessfully scrambled to
enforce that bid after Dish walked away. They later joined
forces with LightSquared on its proposed restructuring.
Ergen contends the plan treats his claims unfairly.
LightSquared has argued in a separate lawsuit that Ergen built
up his debt position illegally, and the sides are still waiting
for a ruling from Chapman in that case.
The case is In re: LightSquared Inc et al, U.S. Bankruptcy
Court, Southern District of New York, No 12-12080.
(Reporting by Nick Brown; Editing by Bernard Orr)