By Joseph Checkler
NEW YORK-- Dish Network Corp. Chairman Charlie Ergen testified
he wanted to keep his purchases of LightSquared's debt confidential
because he didn't want to drive the price up, not because he was
secretly buying it on behalf of LightSquared suitor Dish.
"I didn't want to raise the price of something I was investing
in," Mr. Ergen said on the third day of a trial over whether he
made the purchases on behalf of Dish, a LightSquared competitor
that would have been prohibited from buying the debt. He also said
on Monday, "I just don't really like people knowing my personal
investments, although I guess it's public record now."
Mr. Ergen said that when he personally started accumulating
LightSquared debt in 2012, it was a personal investment and Dish
wasn't interested in buying the company.
Dish withdrew its bid last week, but LightSquared is still
trying to prove that Mr. Ergen's trades were illegally made for
Dish, which could cause his claims in the bankruptcy case to take a
back seat to those of other creditors. Judge Shelley C. Chapman,
LightSquared's bankruptcy judge, will ultimately decide the
issue.
Also, it's unclear whether Dish has walked away for good, or
whether it will still make an offer for LightSquared's wireless
spectrum.
But last spring, Dish made a $2.2 billion offer for that
spectrum. Mr. Ergen said Dish became interested only after it
understood that the type of wireless spectrum LightSquared owned
would match up well with its own spectrum. Spectrum refers to the
limited pockets of airwaves that mobile phone and Internet
companies use. Mr. Ergen said that at one point, he explored
purchasing LightSquared for himself along with Blackstone Group
LP's (BX) GSO Capital Partners, a hedge fund in which he
invests.
At the time of Dish's 2013 bid, Mr. Ergen personally was the
largest holder of LightSquared's bank debt with about $850 million
worth. LightSquared, which is controlled by Phil Falcone and his
Harbinger Capital Partners hedge fund firm, says the debt was
acquired for Dish.
In court Monday, Mr. Ergen said that he used almost $700 million
of his own money to buy the LightSquared debt, from a trust fund in
which his wife is a co-beneficiary. That debt currently is worth
about $850 million, Mr. Ergen testified, adding he has earned a
$150 million profit. He also said he could be entitled to much more
in "accrued interest" if the debt is paid off in LightSquared's
bankruptcy.
LightSquared and Harbinger have said the debt purchases were
illegal, because the purchases by Mr. Ergen's SP Special
Opportunities LLC investment vehicle were actually for Dish, not
Mr. Ergen. LightSquared's lawyer asked Mr. Ergen questions about
both his own and Dish's actions related to LightSquared, sometimes
saying "you" for both. Judge Chapman insisted the lawyer be clearer
when asking those questions.
Last week, Dish Treasurer and Ergen confidante Jason Kiser
testified that Mr. Ergen was advised to create the new investment
vehicle for the LightSquared purchases. Making the purchases in his
own name, the advisers thought, could have been legally treated as
though they were done for Dish. Harbinger's Mr. Falcone is expected
to testify later this week.
In its main bankruptcy case, LightSquared is pushing for a $4
billion restructuring proposal-led by Fortress Investment Group LLC
(FIG)-that it says is better than the now-abandonded Dish sale and
a sale of a smaller swath of the company's wireless spectrum to
creditors U.S. Bancorp (USB) and Mast Capital Management.
Both the Dish sale and LightSquared plans would have paid off
the holders of more than $1.8 billion in LightSquared bank debt, a
group that includes Mr. Ergen's SP vehicle as well as several hedge
funds.
Those hedge funds had presented the $2.2 billion Dish sale as a
reorganization plan for LightSquared, and as recently as last
Tuesday said that they still wanted to move forward with that deal.
The lenders on Monday said they don't think Dish's bid is
officially terminated, and they still hope to go forward with
it.
LightSquared filed for bankruptcy protection in May 2012 after
federal regulators refused to clear the company's network plans,
which they said could interfere with global-positioning systems.
Dish's bid was less contingent on regulatory approvals than the
LightSquared proposal, which Dish had touted as a reason its
proposal was superior.
Write to Joseph Checkler at joseph.checkler@wsj.com
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