| NEW YORK, March 19
NEW YORK, March 19 A member of a committee
helping to oversee LightSquared's restructuring said on
Wednesday he believes the company's plan to subordinate the
claims of its largest creditor, Dish Network Corp
Chairman Charles Ergen, is fair.
Testifying in the U.S. Bankruptcy Court in New York,
Christopher Rogers, a member of the independent special
committee, said the plan is not an attempt to punish Ergen for
what LightSquared views as his surreptitious methods of
Rogers' testimony came during the opening day of what could
be weeks of court hearings on LightSquared's proposed
restructuring plan. The company is seeking approval by Judge
Shelley Chapman to put the plan into effect and exit bankruptcy.
LightSquared filed for Chapter 11 in 2012 after the Federal
Communications Commission revoked its license to build a planned
wireless network on concerns it could interfere with GPS
Ergen bought up about $1 billion worth of LightSquared's
senior loan debt, despite an agreement between LightSquared and
its lenders that barred competitors from acquiring the company's
debt. Ergen said he bought the debt in his personal capacity,
not on behalf of Dish.
LightSquared and its main shareholder, Phil Falcone's
Harbinger Capital Partners, sued Dish and Ergen, saying the
latter had bought the debt on Dish's behalf, to circumvent the
credit agreement and stack the deck for a Dish takeover. The
sides are still waiting for Chapman to rule on that case.
In the meantime, LightSquared is moving ahead with a
proposed restructuring that would subordinate Ergen's claims on
the premise that they are not valid senior secured claims. It
would stick Ergen with a long-term note while paying other
lenders in cash.
His lawyers have called the plan a ploy to allow Harbinger
to retain equity in LightSquared. But Rogers on Wednesday said
the note would still eventually pay Ergen in full.
"We thought that was justified in this case," Rogers said.
Lawyers for Ergen shifted the focus to the viability of
LightSquared's plan, grilling witnesses on whether LightSquared
can realistically expect to regain the FCC's approval for its
license. Though the company does not need such approval to
effect its bankruptcy plan, the issue cuts to the heart of
whether LightSquared is a viable company in the long term. That
question matters especially for creditors such as Ergen, who may
be paid over time rather than in cash.
Robert McDowell, a former FCC commissioner who is now a
consultant for LightSquared on FCC issues, testified on
Wednesday that he believes the company will get approval for the
bulk of its broadband rights by the end of 2015.
But McDowell was on the commission when it revoked
LightSquared's license in 2012, and lawyers for Ergen reminded
him that it had good reasons for doing so, namely interference
concerns raised by members of the GPS industry.
When pressed by a lawyer for Ergen during cross-examination,
McDowell acknowledged that the FCC places high importance on
concerns raised by GPS companies, which have urged the agency
not to act until the potential interference effects have been
more deeply studied.
Still, the fate of LightSquared's plan likely rests more on
its treatment of Ergen than on any other issue. That's why
Chapman's ultimate decision in the company's lawsuit against
Ergen is critical. If Chapman finds that Ergen did not act
surreptitiously, she is unlikely to confirm a plan that proposes
treating him differently than other lenders.
That could create a major time-crunch for LightSquared,
whose bankruptcy funding is expected to run out sometime in
early or mid-April.
The hearing on the plan is expected to continue on Thursday
with testimony from LightSquared Chief Executive Doug Smith.
The case is In Re LightSquared Inc, U.S. Bankruptcy Court,
Southern District of New York, No. 12-12080.
(Reporting by Nick Brown; Editing by Marguerita Choy)