Ergen-backed Sound Point Capital Management has quietly purchased close to $1 billion in LightSquared secured debt over the last year, with acquisitions increasing over recent months.
The Dish Network (DISH) chairman's accumulation of debt is at the center of a dispute over LightSquared's exclusive right to file a reorganization plan, which expires in mid-July. Judge Shelley Chapman will hold a status conference on the matter on Wednesday in the U.S. Bankruptcy Court for the Southern District of New York.
A group of investors holding secured debt at LightSquared said in pleadings that the debtor is using Ergen's purchases to get out of its requirements under a February agreement on the debtor's exclusive right to file a reorganization plan. The creditors said LightSquared sent a letter in May stating that the company would not have to comply with the deal, because their group was no longer the largest holder.The February agreement mandated that the terms would hold only if the secured LP group collectively had the largest position in the $1.7 billion class of debt. LightSquared said in court filings that Sound Point's trading activity invalidates the agreement, even though Ergen's fund has since joined the secured group. The debtor argued that Ergen's fund gamed the system by arranging debt purchases but neglecting to close the trades, leaving ownership of the debt in limbo and preventing the debtor from negotiating a plan. "What is shocking, and wholly uncontemplated," LightSquared argued, is that "the closing of trades would be delayed thereby keeping the technical parameters ... from ever being triggered, even though the economics of the situation and reality demonstrated otherwise." The group of LP debt holders have about $1.3 billion of the $1.7 billion in debt in the class. Sound Point has by far the largest position, with about $820 million in secured debt. "On June 13, one day before $120 million in hung trades were set to close, which trades would have officially made Sound Point larger than the Ad Hoc Secured Group ..., Sound Point joined the Ad Hoc Secured Group," LightSquared said in pleadings.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV