Ergen Not Giving Up On LightSquared Ch. 11 Injunction

Dish Network Corp. Chairman Charlie Ergen filed an appeal on Thursday against an injunction that LightSquared Inc. obtained under a restructuring strategy limiting the ability of creditors like him to obstruct the wireless venture’s efforts at obtaining government approval for its terrestrial network.

The appeal by LightSquared’s longtime foe and largest single creditor disputes aspects of a court-approved reorganization aimed at positioning the debtor to revive a nationwide network proposal rejected by the Federal Communications Commission in 2012.

Ergen, long suspected by LightSquared’s backers of trying to sabotage the network, stands in line to collect full cash repayment on a $1.5 billion claim against LightSquared once the FCC greenlights the debtor to hand ownership over to a new investment consortium.

The outcome of the appeal won’t affect LightSquared’s ability to consummate the plan, according to Ergen’s lawyers at Willkie Farr & Gallagher LLP, who declined further comment on Friday.

The injunction at issue bars “any action that is intended or is reasonably likely to directly or indirectly prevent, impede, hinder, adversely affect and/or delay” the plan’s implementation.

Stakeholders may, however, communicate with or otherwise exercise their existing rights to petition the FCC for relief, a proviso that U.S. Bankruptcy Judge Shelley Chapman approved of during a trial on the plan last month.

“Anyone who wants to go to the FCC, for example, and suggest that the license [modification] not be granted can do that under this language,” Judge Chapman said.

Ergen dropped his objection to the plan after LightSquared found new financing from Jefferies LLC to cash out his claim. Expelling Ergen from the reorganized LightSquared was a longstanding goal of the debtor and its sponsors, which have worried about his potential influence as the head of a major wireless competitor.

By appealing, Ergen appears to be angling for freedom to take positions against LightSquared in the future, according to spectrum analyst Armand Musey of Goldin Associates LLC, who is not involved in the bankruptcy.

A representative for LightSquared did not immediately respond to a request for comment on Friday.

The restructuring proposal previously contained broader language that drew objections from a government attorney who wanted the injunction narrowed to prohibit only actions specifically related to plan consummation.

Lawyers for Dish and for Ergen’s personal investment vehicle SP Special Opportunities LLC raised similar concerns at trial, arguing that the injunction would improperly grant Judge Chapman jurisdiction over commercial proceedings unrelated to the bankruptcy.

“It should be scaled back through and including the effective date because what that means [is] it makes sure the injunction is not unlimited in time, unlimited in scope, unlimited in breadth,” Willkie Farr’s Tariq Mundiya said. ‘This as it stands precludes, bars any action directly or indirectly.”

LightSquared, a hugely promising startup backed by hedge fund magnate Philip Falcone, sank into Chapter 11 in 2012 when the FCC rejected its proposed nationwide wireless network over concerns about interference with global positioning technologies.

Seven previous restructuring proposals fizzled, one rejected by Judge Chapman and six tentative agreements that never gained enough creditor support to advance as lawyers debated the ultimate value of LightSquared’s spectrum assets with a renewed licensing application still sitting before the FCC.

With no way to know how, or when, the agency will rule, the valuation question was fraught with conflict. Overvaluing LightSquared could allow it to raise more new debt, which could become problematic in the future — even paving a path back into bankruptcy — if the assets don't prove lucrative enough.

The confirmed plan salvages a 44 percent equity stake for Falcone’s Harbinger Capital Partners LLC while splitting up the reorganized entity’s remaining equity interests and board seats among Fortress Credit Opportunities Advisors LLC, Centerbridge Partners LP and JPMorgan Chase & Co.

LightSquared is represented by Matthew S. Barr, Alan J. Stone, Michael L. Hirschfeld and Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP. LightSquared’s special committee is represented by James H.M. Sprayregen, Paul M. Basta and Joshua A. Sussberg of Kirkland & Ellis LLP.

Ergen is represented by Rachel C. Strickland, Tariq Mundiya, James C. Dugan and Norman P. Ostrove of Willkie Farr & Gallagher LLP.

Harbinger is represented by David M. Friedman and Adam L. Shiff of Kasowitz Benson Torres & Friedman LLP. Centerbridge is represented by Brad Eric Scheler, Peter B. Siroka and Aaron S. Rothman of Fried Frank Harris Shriver & Jacobson LLP. Fortress is represented by Frank A. Merola and Jayme T. Goldstein of Stroock & Stroock & Lavan LLP.

The case is In re: LightSquared Inc., case number 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.

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