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Subsequent Events
6 Months Ended
Jun. 30, 2013
Subsequent Events  
Subsequent Events

11.       Subsequent Events

 

On July 23, 2013, L-Band Acquisition, LLC (“L-Band”), a wholly-owned subsidiary of DISH Network, formed to make a bid to acquire assets of LightSquared LP, entered into a Plan Support Agreement (the “PSA”) with certain senior secured lenders to LightSquared LP, which contemplates the purchase by L-Band of substantially all of the assets of the LightSquared LP Entities (as defined below) for a purchase price of $2.22 billion in cash, plus the assumption of certain liabilities pursuant to the terms and conditions of a proposed asset purchase agreement (the “Proposed APA”).  SP Special Opportunities, LLC, an entity controlled by Charles W. Ergen, our Chairman, is a senior secured lender to LightSquared LP and holds a substantial portion of LightSquared LP’s senior secured debt.  DISH Network is a party to the PSA solely with respect to certain guaranty obligations.  DISH Network’s Board of Directors (the “Board”) approved entering into the PSA, which would implement the Proposed APA, based, among other things, on the recommendation of a special committee of the Board (the “Special Committee”) and a fairness opinion that was prepared by a financial advisory firm at the request of the Special Committee.

 

Pursuant to the PSA, L-Band and such lenders have agreed, subject to the terms and conditions set forth therein, to support and pursue confirmation of a plan of reorganization (the “LightSquared LP Plan”) for LightSquared LP and certain of its subsidiaries that are debtors and debtors in possession (collectively, the “LightSquared LP Entities”) in pending bankruptcy cases under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), which cases are jointly administered under the caption In re LightSquared Inc., et. al., Case No. 12-12080 (SCC).

 

L-Band’s purchase offer under the LightSquared LP Plan is subject to the submission of higher and better offers in accordance with certain bid procedures to be proposed in connection with the LightSquared LP Plan.  In addition, the LightSquared LP Plan is subject to confirmation by the Bankruptcy Court.  The Proposed APA has not been negotiated with, or executed by, the LightSquared LP Entities.  Consummation of the acquisition contemplated under the Proposed APA is subject to, among other things, Bankruptcy Court, FCC and Canadian federal Department of Industry (“Industry Canada”) approvals.  However, funding of the purchase price under the Proposed APA is not conditioned upon receipt of approvals from the FCC or Industry Canada.  DISH Network would be a party to the Proposed APA solely with respect to certain guaranty obligations.

 

On August 6, 2013, Harbinger filed an adversary proceeding against DISH Network, L-Band, EchoStar, Mr. Ergen, other affiliates of Mr. Ergen, and certain other parties, in the Bankruptcy Court.  See Note 8 for further information.

 

We may make cash distributions to DISH Network to, among other things, finance the proposed purchase by L-Band of substantially all of the assets of the LightSquared LP Entities and to finance the commercialization and build-out requirements of the acquired licenses and DISH Network’s integration efforts including compliance with regulations applicable to the acquired licenses.  There can be no assurance that DISH Network will ultimately be able to complete the acquisition contemplated under the Proposed APA.  Further, to the extent that DISH Network completes the acquisition contemplated under the Proposed APA, there can be no assurance that DISH Network would be able to develop and implement a business model that would realize a return on the acquired assets or that DISH Network would be able to profitably deploy the acquired assets.  If DISH Network is unable to successfully address these challenges and risks, its business, financial condition or results of operations could suffer.

 

Furthermore, if DISH Network enters into the Proposed APA, funding of the purchase price is not conditioned upon receipt of approvals from the FCC or Industry Canada.  If the required approvals are not obtained, subject to certain exceptions, DISH Network would have the right to direct and require a sale of some or all of the assets of the LightSquared Entities to a third party and DISH Network would be entitled to the proceeds of such a sale.  These proceeds could, however, be substantially less than amounts DISH Network would have funded under the Proposed APA.  Therefore, if DISH Network fails to obtain these necessary regulatory approvals, it may suffer significant financial losses.