Charlie Ergen stands to make quite a bit of money if he succeeds in prying LightSquared's spectrum from Phil Falcone's cold, hockey-hardened hands. Fancy that.
The satellite television mogul over the past year took on a role in LightSquared's bankruptcy case usually reserved for Wall Street investment firms: distressed-debt investor. Mr. Ergen, through an entity called SP Special Opportunities LLC, purchased LightSquared bank debt at a discount and now stands to profit handsomely if Dish succeeds in buying the company, according to people familiar with his purchases. SP Special Opportunities is wholly-owned by Mr. Ergen, according to court records.
Dish's $2.2 billion bid for LightSquared would repay lenders owed roughly $1.7 billion fully with interest. Mr. Ergen eventually accumulated LightSquared debt worth more than $1 billion, but paid well below face value when making the trades over the past 15 months or so, according to court records and some of the people familiar with the matter. The prices Mr. Ergen's trading vehicle paid haven't been publicly disclosed, but some people close to the matter said some were around 50 or 60 cents on the dollar, with other purchases made for higher prices, setting him up for hundreds of millions of dollars in profits.
And in case you think that Phil's allegations that this is all more than a little fishy are ringing true right now, don't worry: Charlie's colleagues have wrung their hands and wracked their brains, and can't find a thing wrong with it.
The circumstances surrounding Mr. Ergen's trades prompted Dish to form a special committee of the company's board earlier this year to mull whether to make a bid for LightSquared, according to a regulatory filing and people close to the company. The special committee comprised independent directors and excluded Mr. Ergen, one of these people said.
Dish's special board committee spent months evaluating a possible bid to ensure the offer would be an arm's length transaction given Mr. Ergen's positions in LightSquared debt, this person said.
Dish's special committee reviewed the company's decision to submit a reorganization plan for LightSquared alongside other lenders that centered on Dish's bid for LightSquared, and Dish's full board then approved it, according to a Tuesday regulatory filing. During that vetting process, the special committee also received a "fairness opinion" from a financial advisory firm, the filing said.