LightSquared’s heavyweight lenders are putting the screws to Dish Network founder Charlie Ergen for backing out on his $2.2 billion deal to buy the wireless startup’s spectrum.
The group, including investment giants Fortress and Capital Research & Management, are seeking to force Dish to follow through on its purchase agreement, according to court papers.
Ergen had no right to walk away from the exclusive deal, the group of lenders claim in a memo filed Monday in Manhattan bankruptcy court.
The lenders, owners of a $1.7 billion LightSquared bank loan, claim when Dish walked away from its deal it robbed them of any hope of recovering their investment.
The group asked Judge Shelley Chapman, who is overseeing the tangled bankruptcy, to force Ergen, who owns $800 million of that debt, to keep up with his end of the bargain — or face sanctions.
But there are other storm clouds in the case.
On Friday, Manhattan US Attorney Preet Bharara filed a letter with the bankruptcy court saying there’s no guarantee that LightSquared will get approval from the Federal Communications Commission this year to build out and operate its 4G wireless network.
An FCC delay that long could put the kibosh on a $4 billion restructuring plan backed by Phil Falcone.
The plan submitted by Falcone, who controls LightSquared through his Harbinger Capital hedge fund, is conditioned on FCC approval before Dec. 31.
The company filed for Chapter 11 in 2012 after the FCC failed to okay its use of the 4G spectrum.
The bankrupt Reston, Va., startup has attracted the money and attentions of a string of billionaires in recent years — including Carl Icahn and Appaloosa’s David Tepper — amid forecasts of a spectrum shortage.
But the FCC’s warning lessens the chance that another deep-pocketed investor will save the day, said telecom expert Tim Farrar. “This has just upped the regulatory risk significantly,” Farrar said.
That could leave debtholders, including Ergen, without a clear path toward recouping their investments.
Lawyers for Ergen have said that the satellite mogul had every right to back out because certain “milestones” weren’t met, including a condition that the plan be consummated before the end of 2013.