LightSquared committee authorizes suit targeting Ergen, Dish Network

By Caroline Salls

Pittsburgh, Nov. 18 - A special committee of LightSquared Inc. and LightSquared GP Inc.'s boards of directors authorized the company to file a complaint against Dish Network and related entities in connection with the purchase of LightSquared debt, according to a status report filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the defendants named in the complaint are SP Special Opportunities, LLC, Dish Network Corp., EchoStar Corp. and Charles W. Ergen.

The special committee said LightSquared negotiated a credit agreement that included restrictions on competitors purchasing the company's debt.

The committee said the agreement was designed to ensure that competitors, "who are looking to maximize value for their own account and often at the expense of a direct competitor (and/or its creditors and other stakeholders), are excluded from participating and gaining access to a competitor's capital structure and confidential information."

"The special committee believes - and the discovery it has reviewed suggests - that Dish and its related parties sought to accomplish indirectly what they could not accomplish directly: own LightSquared's debt and advance the interests of LightSquared's competitor, not LightSquared," the report said.

According to the committee's report, this action is needed "to get to the bottom of something that, on its face, seems wrong," to ensure that the integrity of the Chapter 11 cases is respected and "to redress a harm that defeats the very purpose for which certain credit agreement restrictions were designed."

Alleged Ergen plan

In the complaint filed as part of its report, the company said the action arises out of a plan devised by Ergen, acting through entities that he controls, to acquire LightSquared's spectrum assets on terms and conditions that were dictated by Ergen.

In so doing, the complaint said SP Special Opportunities, Dish, EchoStar, and Ergen violated LightSquared's October 2010 credit agreement, a related assignment and assumption agreement and the law.

"Because of LightSquared's bankruptcy, Dish, acting through its agent Mr. Ergen, apparently saw a chance to purchase LightSquared's valuable assets at a price dictated by Dish, and devised and implemented a plan to achieve that goal," the complaint said.

However, LightSquared said Dish would have to purchase the debt in violation of the credit agreement.

To circumvent the transfer restrictions in the credit agreement, the company said Dish disguised its purchases of loan interests by having DISH and EchoStar act through Ergen.

Ergen created SP Special Opportunities through entity Special Opportunities Holdings LLC and acquired more than $1 billion worth of debt, according to the complaint.

Through the complaint, LightSquared is asking the court to disallow SP Special Opportunities' claims in full, or at least to the extent that SP Special Opportunities would receive an unjust profit for its inequitable conduct, to subordinate SP Special Opportunities' claims to all claims except those of LightSquared's equity interest holders, to award compensatory damages and punitive damages in an amount to be determined at trial, as well as pre-judgment and post-judgment interest and adversary proceeding costs.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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