The man who advised Dish Network Corp. (DISH:US) Chairman Charles Ergen on buying $1 billion in LightSquared Inc. debt said he didn’t always consider whether he was working for Dish or the billionaire personally.
The adviser, Dish Treasurer Jason Kiser, testified today before U.S. Bankruptcy Judge Shelley Chapman in Manhattan at a trial over whether LightSquared can disallow Ergen’s claim. The judge asked Kiser who he was working for when he first looked into buying the debt in 2011.
“I didn’t give it much thought at the time,” said Kiser, who has known Ergen for 27 years.
Ergen is accused of surreptitiously buying debt in LightSquared, the wireless broadband provider owned by Philip Falcone, to hijack its reorganization and gain control of its airwaves. Ergen knew the credit agreement barred competitors such as Dish from owning the debt and he blocked attempts to reveal who was behind the purchases, according to LightSquared.
LightSquared found out this week that Ergen, 60, wants to withdraw his $2.2 billion bid for the airwaves. Falcone, 51, had been trying to fend off Ergen’s bid so he can reorganize Reston, Virginia-based LightSquared on its own.
The trial may let LightSquared get any profit Ergen’s fund made from the debt purchases, which would help in a stand-alone restructuring, a company lawyer said.
LightSquared has said that Ergen’s investment vehicle, SP Special Opportunities LLC, was prohibited from buying the debt because it’s a competitor, and that Kiser was acting on behalf of Englewood, Colorado-based Dish when he caused SP to execute its purchases.
Ergen has said he was acting personally, rather than for Dish, the satellite-TV company he co-founded, or his other company, EchoStar Corp. (SATS:US), a maker of satellite broadcast equipment. Ergen has called the debt purchases smart and said he made no “false representations” about the investment.
Falcone’s Harbinger Capital Partners LLC, which controls LightSquared, has said Ergen wants the airwaves to expand into the wireless business.
LightSquared filed for bankruptcy in May 2012 after the Federal Communications Commission blocked the company’s service, saying it might interfere with civilian and military global-positioning-system navigation equipment. The company listed assets of $4.48 billion and debt of $2.29 billion.
Chapman has questioned how, without Ergen, LightSquared will get the cash it needs to reorganize on its own. The company’s plan includes $2.5 billion in financing backed by Fortress Investment Group LLC (FIG:US), JPMorgan Chase & Co. (JPM:US) and Melody Capital Advisors LLC, and would require regulatory approval.
Kiser, who took his first job out of college working for a Dish predecessor, testified that he goes to sporting events, plays golf and poker, and takes joint family vacations with the Ergens.
He said their personal relationship also entailed financial work, describing how he was sometimes involved with Summit Capital, a family office that takes care of the Ergens’ estate planning, taxes and other personal financial matters. He also once helped Ergen buy a ranch.
Kiser said when he first started looking into purchases of LightSquared debt at Ergen’s request in 2011, he sought legal advice from Sullivan & Cromwell LLP, which told him the terms of the credit agreement prohibited ownership by a rival. From that point on, Kiser testified, it was clear he was working for Ergen on a personal basis.
Kiser said he didn’t use money from Dish or EchoStar to buy the debt and didn’t reply when a member of Dish’s board (DISH:US) asked whether Ergen may have made some large purchases in May 2012.
He said he set up an entity, Bal Harbour, named after the South Florida village, to buy the debt. When he realized Colorado was listed as that fund’s location, he created a new vehicle, SP, to deflect suspicion of a link to Ergen.
“They know where Charlie lives, they know he has interest in spectrum,” Kiser said. “All of my great creative naming would have been for naught.”
Ergen’s lawyers have said he had the right to buy the debt personally and that he didn’t want his name to be known because it could have driven up the price.
SP Special Opportunities is part of a group of lenders that owns about $1.4 billion of $1.7 billion in debt issued by LightSquared’s main “LP” unit and backed Ergen’s proposal to buy the airwaves. Under the Ergen plan, LightSquared could satisfy its debts while he addressed the technical and political barriers to regulatory approval.
Tom Lauria, a lawyer for the lender group, has said they are “considering all alternatives” and are still in talks with Dish to explore the consequences of its motion to drop out.
The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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