LightSquared takes on Ergen lawsuit

US satellite/terrestrial venture LightSquared has filed a lawsuit against Dish Network chairman Charlie Ergen and related entities, risking delays to its auction next month.
The legal action effectively revives an earlier lawsuit by its controlling…

US satellite/terrestrial venture LightSquared has filed a lawsuit against Dish Network chairman Charlie Ergen and related entities, risking delays to its auction next month.

The legal action effectively revives an earlier lawsuit by its controlling shareholder Harbinger Capital Partners, which accused Ergen of improperly becoming the largest holder of the venture’s debt.

That lawsuit also claimed the debt trades were made on behalf of Dish – which as a competitor is banned from buying LightSquared debt during Chapter 11 protection – but it was thrown out in October by Judge Chapman.

At the time, Chapman said LightSquared itself could sue Ergen if it believes the debt trades were acquired through Dish rather than an investment vehicle he controls.

Although Dish is mainly a DTH operator, it has been amassing spectrum as part of plans to deploy an LTE network. The matter is complicated by Dish currently being the lead bidder in an auction of LightSquared set for next month, with a US$2.2bn bid for the venture’s main spectrum holdings.

Bids are due before the end of November, and a bankruptcy court hearing has been scheduled for 10 December to consider the sale.

In court filings, the special committee of LightSquared’s board noted that the lawsuit could impact the proposed timeline of its sale.

However, it stated: “Among other things, this action is needed to (a) get to the bottom of something that, on its face, seems wrong, (b) ensure that the integrity of these (and all) Chapter 11 cases is respected, and, just as importantly, (c) redress a harm that defeats the very purpose for which certain credit agreement restrictions were designed.”

A Dish spokesman said: “Both the timing and content of LightSquared’s complaint reveal it as a desperate measure to avoid selling its assets to the highest bidder in a few weeks time.

“This elaborate distraction seems designed to shift attention from years of LightSquared mismanagement leading to bankruptcy. While frivolous litigation is an unfortunate by-product of this process, Dish remains focused on participating in the upcoming auction for LightSquared’s assets and is confident that these matters will be determined in its favour.”