NEW YORK--LightSquared's bankruptcy judge on Friday ordered Dish
Network Corp. to turn over emails with specific search terms from
Chairman Charlie Ergen and other Dish employees to a group of hedge
funds fighting Mr. Ergen's status as a LightSquared creditor.
Judge Shelley C. Chapman said Dish must turn over documents with
the letters "LS," for LightSquared, and several versions of the
word "terminate" from April 2013 until now. The judge turned down
the hedge funds' request for other searches, including the words
"auction" and "bid" related to Dish's $2.2 billion offer for
LightSquared's spectrum assets abandoned earlier this year.
Dish lawyer Brian T. Frawley of Sullivan & Cromwell LLP said
the company didn't think anything provocative would be turned up in
the emails but complained about the process of the search.
"I'm worried about wasting the time reviewing a lot of
documents," Mr. Frawley said. Judge Chapman responded, "Can't help
you with that."
The fight between the hedge funds and Mr. Ergen, once allies in
the case, has escalated since Dish abandoned its bid. Later in the
hearing, Dish argued over its own requests for discovery, saying it
needs documents with more than 100 terms from LightSquared.
Along with LightSquared, the hedge funds are trying to prove
that Mr. Ergen bought LightSquared debt improperly on behalf of
Dish, a competitor that was prohibited from buying it. They say the
purchases were part of a "scheme" to gain control of the debt to
make it easier for Dish to buy LightSquared. If successful, Mr.
Ergen's claims in the case could be disallowed or pushed behind
those of other creditors. LightSquared is also trying to get its
latest reorganization plan approved by the court, a proposal that
would theoretically pay Mr. Ergen in full for his $850 million in
debt owned, but give him a "third-lien" note rather than cash. The
hedge funds, who own a large chunk of that bank debt, would get
cash under the plan.
The new LightSquared restructuring proposal, backed by Fortress
Investment Group LLC, is scaled down from a $4 billion Fortress-led
reorganization that LightSquared abandoned earlier. It calls for a
$1.65 billion loan while the company is in bankruptcy proceedings
and then a fresh $1 billion loan to finance the company once it
exits Chapter 11.
The new plan isn't contingent on regulatory approval, a key
difference between this and the prior Fortress-led proposal.
Therefore, the plan requires less funding because LightSquared
would emerge from bankruptcy proceedings much sooner than under the
prior one.
Phil Falcone's Harbinger Capital Partners, which currently
controls LightSquared, would participate in the new financing and
retain an equity stake. Harbinger would own about 36% of
LightSquared's equity if this proposal gets approved.
LightSquared filed for protection from creditors in May 2012
after federal regulators refused to clear its plans to launch a
wireless network, which they said could interfere with
global-positioning systems. Its previous proposals all were
contingent on the Federal Communications Commission approving
modifications to LightSquared's network, which the agency has said
isn't imminent.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@wsj.com
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