Satellite TV mogul Charles Ergen is seeking permission to sue LightSquared controlling shareholder Philip Falcone over his handling of the wireless venture’s bankruptcy.
Lawyers for Ergen, chairman of US DTH giant Dish Network, accused Falcone of…
Satellite TV mogul Charles Ergen is seeking permission to sue LightSquared controlling shareholder Philip Falcone over his handling of the wireless venture’s bankruptcy.
Lawyers for Ergen, chairman of US DTH giant Dish Network, accused Falcone of disregarding fiduciary duties as a director of LightSquared, which has been in Chapter 11 protection for nearly two years.
In a court filing, representatives of Ergen’s SP Special Opportunities (SPSO) vehicle claimed Falcone was more focused on preserving his own investments, causing the venture to avoid a “potentially value maximising transaction” at every turn.
Falcone indirectly owns around 96% of LightSquared through his controlling interest in New York hedge fund Harbinger Capital Partners and affiliated funds.
“The only silver lining is that LightSquared has now accrued a new source of value – claims against Mr Falcone worth potentially hundreds of millions of dollars,” said the Willkie Farr & Gallagher lawyers.
SPSO owns around US$1bn of LightSquared’s debt and had backed a US$2.2bn sale to Dish before the satellite broadcaster withdrew its offer in January.
That offer had already been rejected by Harbinger, which is backing a restructuring plan that would repay Ergen in debt rather than cash like the venture’s other lenders.
The proposal is awaiting approval from bankruptcy court judge Shelley Chapman, who is also set to rule on whether SPSO improperly bought the debt in the first place because of Ergen’s ties to Dish.
LightSquared recently decided to sue Ergen over the debt trades, effectively reviving an earlier lawsuit from Harbinger that was thrown out of court by Chapman in October.
Ergen claims his debt trades were personal investments and were not made on behalf of Dish.
LightSquared filed for voluntary reorganisation in May 2012, after spectrum it planned to use for a nationwide LTE network was found to interfere with GPS.
It is still talking to regulators for a way around these spectrum concerns; however, the FCC recently said it was unsure whether it would be able to approve the planned network by the end of 2014.
LightSquared to net US$74m replacement DIP loan
LightSquared is to nearly double the size of its short-term DIP loan to around US$74m after warning it risked running out of cash.
Chapman approved the loan to replace an earlier US$33m facility, including the roughly US$1m worth of interest it had racked up. The new debt will run until 15 June and carries a 15% per annum interest rate that is payable in kind.
Court filings show SPSO once again agreed to provide 53% of the debt.
Investment group Capital Research and Management Company is providing 20.8%. Private equity firm Fortress Investment Group, which is backing the aforementioned bankruptcy plan that is supported by Harbinger, has stumped up 10.1%.
