LightSquared lender group files emergency motion citing Dish scheme

By Kali Hays

New York, Feb. 27 - LightSquared Inc.'s informal secured group of lenders is seeking planning documents from SP Special Opportunities LLC, Dish Network Corp. and Charles W. Ergen of Dish Network Corp., according to an emergency motion filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the lenders are seeking documents that mention plans to acquire LightSquared's assets at a discount, terminate a bid, exploit LightSquared's "cash crisis" and show the companies "acting in concert at the direction of Charles W. Ergen," the motion stated.

The lenders initially requested the documents on Jan. 13 based on Ergen and the two companies being part of a "concerted 'bait and switch' bidding strategy," according to the motion.

The lenders said this strategy involved a scheme to "lock-up support" for a bid from SPSO that the parties had no intention of consummating unless there was a higher bid. Then, if the auction was unsuccessful, the lenders said the parties intended to terminate the bid when LightSquared was in a cash crisis and submit one that was less valuable.

The lenders claim the 15 documents Dish submitted were insufficient.

SPSO, Dish and Ergen received subpoenas on Feb. 19 requesting relevant documents, but the companies and Ergen refused to cooperate, claiming that the court only required documents related to termination of the aforementioned bid and that anything dated before July 23, 2013 should have been available from prior requests.

The lenders claim that the bait and switch scheme began before July 23, 2013 and are seeking a court order to compel the defendants to produce all documents related to their alleged scheme beginning no later than April 1, 2013.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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