In re Lightsquared Inc.
In re Lightsquared Inc.
Opinion of the Court
DECISION DENYING CONFIRMATION OF DEBTORS’ THIRD AMENDED JOINT PLAN PURSUANT TO CHAPTER 11 OF BANKRUPTCY CODE
TABLE OF CONTENTS
I. BACKGROUND ...62
A. The Third Amended Plan ... 64
B. Motions Filed in Connection with Confirmation ... 66
D. The Confirmation Hearing ... 67
E. LightSquared’s Pending License Modification ... 68
II. CONFIRMATION TESTIMONY ...69
A. Mr. Robert McDowell ... 69
B. Mr. Christopher Rogers ... 71
C. Mr. Douglas Smith ... 71
D. Mr. Marc Montagner ... 72
E. Mr. Steven Zelin .. .72
F. Mr. Charles Ergen ... 73
G. Mr. Omar Jaffrey ... 74
H. Mr. Philip Falcone ... 75
III. THE MOELIS VALUATION ANALYSIS ...76
IV. THE GLC VALUATION ANALYSIS ...79
V. CONFIRMATION TESTIMONY REGARDING THE “TECHNICAL ISSUE” ...81
A. Mr. Douglas Hyslop ... 81
B. Mr. John Jacob Rasweiler V ... 82
DISCUSSION .. .82
I. THE PLAN CANNOT BE CONFIRMED ...82
A. Separate Classification of Prepetition LP Facility SPSO Claim Complies With Section 1122 .. .82
B. SPSO’s Vote to Reject the Plan Shall Not Be Designated .. .89
C. Because SPSO’s Vote Cannot Be Designated, the Cramdown Requirements of Section 1129(b) Are Applicable to Class 7B ... 92
1. The Plan Is Not Fair and Equitable With Respect to Class 7B ... 93
a.The Moelis Valuation ... 96
b. The GLC Valuation ... 96
c. The Ergen Valuation ... 97
d. The PWP Valuation ... 97
e. Additional Valuation Issues ...97
2. The Plan Unfairly Discriminates Against Class 7B ... 99
D.The Claim of SPSO Shall be Subordinated to the Extent of Harm Caused to Innocent Creditors ... 101
II. ADDITIONAL OBJECTIONS TO THE PLAN .. .103
CONCLUSION ...104
Before the Court is the Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code [Docket No. 1308] (as amended, supplemented, or modified in accordance with the terms thereof, the “Third Amended Plan” or the “Plan”). The Plan enjoys the support of every significant party in interest in these cases, save one: SPSO, a special purpose entity owned and controlled by Mr. Charles Er-gen. SPSO opposes confirmation of the Plan. SPSO holds approximately $844 million face amount of the outstanding LightSquared LP prepetition secured debt. The facts and circumstances surrounding SPSO’s acquisition of its claim (the “SPSO Claim”), and the conduct of Mr. Ergen and certain of his affiliated entities in these cases, are the subject of a separate adversary proceeding pending in this Court and are also at issue in connection with consideration of confirmation of the Plan. Among other things, the Debtors seek to disallow or subordinate the SPSO Claim in its entirety, and have also moved, pursuant to section 1126(e) of the Bankruptcy Code, to designate SPSO’s vote. Pointing to SPSO’s connection to Mr. Er-gen and DISH, the Debtors, Harbinger, and the Ad Hoc Group of LightSquared LP Lenders have constructed a Plan that
I. BACKGROUND
LightSquared LP, LightSquared Inc., LightSquared Investors Holdings Inc., TMI Communications Delaware Limited Partnership, LightSquared GP Inc., ATC Technologies, LLC, LightSquared Corp., LightSquared Inc. of Virginia, LightSq-uared Subsidiary LLC, SkyTerra Holdings (Canada) Inc., and SkyTerra (Canada) Inc., as debtors and debtors in possession (collectively, with certain of their affiliated debtors and debtors in possession, “LightSquared” or the “Debtors”) provide wholesale mobile satellite communications and broadband services throughout North America. Through its ownership of several satellites and licenses to use mobile satellite service spectrum issued by the Federal Communications Commission (the “FCC”), LightSquared delivers voice and data services to mobile devices used by the military, first responders and other safety professionals, and individuals throughout North America. (See Declaration of Marc R. Montagner [Docket No. 3] ¶¶ 18-31.)
On May 14, 2012 (the “Petition Date”), LightSquared filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”). Pursuant to Bankruptcy Rule 1015 and the Order Directing Joint Administration of Related Chapter 11 Cases [Docket No. 33], the Court directed the joint administration of the Chapter 11 Cases for procedural purposes only. LightSquared continues to operate its businesses and manage its prop
On August 6, 2013, Harbinger Capital Partners LLC, HGW U.S. Holding Company LP, Blue Line DZM Corp., and Harbinger Capital Partners SP, Inc. (collectively, “Harbinger”) commenced the Adversary Proceeding against Charles Ergen, DISH Network Corporation (“DISH”), EchoStar Corporation (“EchoS-tar”), L-Band Acquisition, LLC (“LBAC”), SP Special Opportunities LLC (“SPSO”), Special Opportunities Holdings LLC, Sound Point Capital Management LP, and Stephen Ketchum, alleging inequitable conduct, fraud, aiding and abetting fraud, tortious interference with prospective economic advantage, tortious interference with contractual relationship, unfair competition, and civil conspiracy; and seeking equitable disallowance of claims, compensatory and punitive damages, costs and fees, interest, and other appropriate relief. After the Court granted motions to dismiss Harbinger’s complaint,
On August 29, 2013, LightSquared filed the General Disclosure Statement [Docket No. 815] and, on October 7, 2013, filed the First Amended General Disclosure Statement [Docket No. 918] (the “General Disclosure Statement”). On October 10, 2013, the Court entered an order approving, among other things, the General Disclosure Statement and certain solicitation, notice, balloting, and confirmation procedures in the Chapter 11 Cases.
On February 14, 2014, LightSquared filed the Plan
A. The Third Amended Plan
Article III of the Third Amended Plan provides for separate classification of claims and equity interests into the following sixteen distinct classes:
Class 1: Inc. Other Priority Claims
Class 2: LP Other Priority Claims
Class 3: Inc. Other Secured Claims
Class 4: LP Other Secured Claims
Class 5: Prepetition Inc. Facility Non-Subordinated Claims
Class 6: Prepetition Inc. Facility Subordinated Claims
Class 7A: Prepetition LP Facility Non-SPSO Claims
Class 7B: Prepetition LP Facility SPSO Claims
Class 8: Inc. General Unsecured Claims
Class 9: LP General Unsecured Claims
Class 10: Existing LP Preferred Units Equity Interests
Class 11 A: Existing Inc. Series A Preferred Stock Equity Interests
Class 11B: Existing Inc. Series B Preferred Stock Equity Interests
Class 12: Existing Inc. Common Stock Equity Interests
Class 13: Intercompany Claims
Class 14: Intercompany Interests
(See Elan, Art. III.)
Each class of Claims and Equity Interests under the Plan contains only Claims or Equity Interests that are substantially similar to the other Claims or Equity Interests within that class. Pursuant to the Plan, holders of Prepetition LP Facility Claims
The Plan contemplates, among other things: (a) first lien exit financing, including a facility of not less than $1.0 billion; (b) the issuance of new debt and equity instruments; (c) the payment of all allowed claims and equity interests with cash and other consideration, as applicable; (d) the assumption of certain liabilities; (e) the provision of a $1.65 billion new debtor in possession facility by the Plan Support Parties (as defined below) shortly following confirmation of the Plan but pri- or to the Effective Date (the “New DIP Facility”) (approximately (i) $930 million of which will be converted into second lien exit financing, (ii) $300 million of which will be converted into the Reorganized LightSquared Inc. Loan, and (iii) approximately $115 million of which will be converted into new equity,
The Plan has the affirmative support of (a) Fortress Investment Group, on behalf of its affiliates’ funds and/or managed accounts (“Fortress”), (b) Melody Capital Advisors, LLC and/or Melody NewCo, LLC, each of behalf of itself and its funds (“Melody”), (c) Harbinger, (d) JP Morgan Chase & Co. or its designated affiliates (“JPMorgan,” and, collectively with Fortress, Melody, and Harbinger, the “Plan Support Parties”), (e) U.S. Bank National
The tabulation reports filed in connection with the Plan reflect the following voting results:
Class Amount Accepted Number Accepted
6 (Prepetition Inc. Facility Subordinated Claims) 100% 100%
7A (Prepetition LP Facility Non-SPSO Claims) 100% 100%
7B (Prepetition LP Facility SPSO Claims) 0% 0%
8 (Inc. General Unsecured Claims) 100% 100%
9 (LP General Unsecured Claims) 100% 100%
10 (Existing LP Preferred Units Equity Interests) 100% 100%
11A (Existing Inc. Series A Preferred Stock Equity Interests) 100% 100%
1 IB (Existing Inc. Series B Preferred Stock Equity Interests) 100% 100%
12 (Existing Inc. Common Stock Equity Interests) 100% 100%
(See Certification of Gil Hopenstand with Respect to Tabulation of Votes on Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code, sworn to March 7, 2014 [Docket No. 1380], Exs. AB.) SPSO, the sole member of Class 7B (Prepetition LP Facility SPSO Claims), voted to reject the Plan. (See id.)
Under the Plan, Holders of Claims or Equity Interests in Classes 1 (Inc. Other Priority Claims), 2 (LP Other Priority Claims), 3 (Inc. Other Secured Claims), 4 (LP Other Secured Claims), 5 (Prepetition Inc. Non-Subordinated Facility Claims), 13 (Intercompany Claims), and 14 (Inter-company Interests) are Unimpaired and, pursuant to section 1126(f) of the Bankruptcy Code, are deemed to have voted to accept the Plan. (See Plan, Art. III.)
B. Motions Filed in Connection with Confirmation
In addition to confirmation of the Plan, there are numerous confirmation-related motions pending before the Court, and the various objections and responses thereto. They are:
• LightSquared’s Motion for Entry of Order Designating Vote of SP Special Opportunities, LLC [Docket No. 1371] (the “Vote Designation Motion”). The Vote Designation Motion seeks to designate the vote of SPSO pursuant to section 1126(e) of the Bankruptcy Code.
• LightSquared’s Confirmation-Related Motion for Order (A) Approving Post-petition Financing, (B) Authorizing Use of Cash Collateral, If Any, (C) Granting Liens and Providing Su-perpriority Administrative Expense Status, (D) Granting Adequate Protection, and (E) Modifying Automatic Stay [Docket No. 1311] (the “New DIP Motion”), seeking an order (a) approving postpetition financing for the period between post-confirmation and the Effective Date, (b) authorizing the use of cash collateral, if any, (c) granting liens and providing superpriority administrative expense status, (d) granting adequate protection, and (e) modifying the automatic stay.
• LightSquared’s Supplement to Motion for Entry of Order Authorizing LightSquared To Modify and Extend Existing Key Employee Incentive Plan [Docket No. 1390] (“the KEIP Supplement”). The KEIP Supplement seeks an order authorizing LightSq-uared to modify its existing Key Em*67 ployee Incentive Plan.16
• LightSquared’s Motion to Strike Certain Portions of Expert Testimony of Douglas Hyslop and J. Soren Rey-nertson [Docket No. 1458] (the “Motion to Strike Hyslop and Reynert-son”)
• SPSO’s Motion to Strike Certain of the Testimony of Robert McDowell and Mark Hootnick [Docket No. 1460] (the “Motion to Strike McDowell and Hootnick”)
• SPSO’s Motion to Admit SPSO Confirmation Exhibit 2 [Docket No. 1505] (the “Exhibit 2 Motion”)17
C. Pleadings Filed in Connection with the Plan and Confirmation-Related Motions
SPSO filed objections to the Plan, the Vote Designation Motion, the New DIP Motion, the KEIP Supplement, and the Motion to Strike Hyslop and Reynertson.
On March 18, 2014, LightSquared filed its (A) Memorandum of Law in Support of Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code and (B) Omnibus Response to Objections to (i) Confirmation of Plan, (ii) Motion to Designate Vote of SP Special Opportunities, LLC, and (Hi) Motion Seeking Approval of New DIP Facility [Docket No. 1413], accompanied by the Declaration of Matthew S. Barr and the Declaration of Douglas Smith. Statements and/or pleadings in support of the Plan were filed by (a) Fortress, (b) Melody, (c) Harbinger, (d) JPMorgan, (e) U.S. Bank and MAST, (f) the Ad Hoc Secured Group, and (g) the Special Committee.
D. The Confirmation Hearing
On March 19, 2014, the Court commenced a hearing on the Plan, the Vote Designation Motion, and the New DIP Motion; the evidentiary hearing was conducted over the course of eight days (the “Confirmation Hearing”). The Court heard live testimony from the following witnesses and rebuttal witnesses called by the Debtors, the Ad Hoc Secured Group, and SPSO: (i) Mr. Christopher Rogers, a member of the Special Committee; (ii) Mr. Robert McDowell, offered by the Debtors as an expert on FCC-related matters; (iii) Mr. Douglas Smith, the Debtors’ Chief Executive Officer; (iv) Mr. Mark Hoot-nick, a Managing Director of Moelis & Company (“Moelis”), the Debtors’ financial advisor; (v) Mr. John Jacob Rasweiler V, a principal of Sublime Wireless, offered by the Debtors as an expert with respect to the “technical issue;”
Detailed proposed findings of fact and lengthy post-trial memoranda were also submitted by the parties, which submissions were in addition to the pre-trial memoranda filed by the parties prior to the commencement of the Confirmation Hearing. The Court heard closing arguments concerning the Plan, the Vote Designation Motion, and the New DIP Motion on May 5 and 6, 2014.
E. LightSquared’s Pending License Modification Application
The Plan valuation is premised on LightSquared’s ownership and/or use of four spectrum blocks within the L-Band: (a) a 10 MHz downlink at 1526 to 1536 MHz (“Lower Downlink”); (b) a 10 MHz uplink at 1627.5 to 1637.5 MHz (“Uplink 1” or “Lower Uplink”); (c) a 10 MHz uplink at 1646.7 to 1656.7 MHz (“Uplink 2” or “Upper Uplink”); and (d) a spectrum block located at 1670 to 1680 MHz (the “New Downlink”), which is comprised of 5 MHz currently used by the National Oceanic and Atmospheric Administration (“NOAA”) and 5 MHz currently leased by LightSquared.
On September 28, 2012, LightSquared filed with the FCC a series of applications seeking to modify various of its licenses (collectively, the “License Modification Application”) to, among other things:
• authorize LightSquared to use the 1675-1680 MHz spectrum band (the “NOAA Spectrum”) on a shared basis with certain government users, including NOAA;
• permit LightSquared to conduct terrestrial operations “pairing” the 1670-1680 MHz New Downlink with two 10 MHz L-Band uplink channels in which LightSquared currently is authorized to operate (Uplink 1 and Uplink 2); and
• permanently relinquish LightSquared’s right to use its upper 10 MHz of L-Band downlink spectrum (a 10 MHz band at 1545.2 to 1555.2 MHz) for terrestrial purposes (that portion of the spectrum closest to the band designated for GPS devices).
In conjunction with submitting the License Modification Application, LightSq-uared also asked that the FCC open a proceeding via a petition for rulemaking, filed on November 2, 2012, to make an administrative change amending the U.S. Table of Frequency Allocations to add a
LightSquared has also requested that the FCC open an additional proceeding via a petition for rulemaking to examine the conditions and operational parameters under which its Lower Downlink could be used sometime in the future for terrestrial service. LightSquared asserts that it will have authorization to use the Lower Downlink within the next three to seven years. (See Conf. Hr’g Tr. Mar. 20, 2014 (Smith) 131:22-25 (three to five years); Mr. McDowell testified that “the lower 10 will be granted within approximately seven years.”) (See Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) 73:17-19.) None of SPSO’s witnesses testified regarding the timing or likelihood of FCC approval for the Lower Downlink.
While effectiveness of the Plan is not conditioned on FCC approval of LightSq-uared’s pending License Modification Application, LightSquared’s Plan valuation relies on opinions offered at the Confirmation Hearing that the FCC will approve the pending License Modification Application and the later use of its Lower Down-link within the timeframes upon which the valuation is based.
II. CONFIRMATION TESTIMONY
A. Mr. Robert McDowell
Mr. Robert McDowell, a former FCC Commissioner, was retained by the Special Committee in November 2013 to advise it with respect to FCC issues and was presented as an expert witness at the Confirmation Hearing. (See Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) at 73:22-24.) Mr. McDowell left the FCC in May 2013, having served as one of five FCC Commissioners for a period of almost seven years. (See Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) at 70:22-25; PX1078.)
During the Confirmation Hearing, Mr. McDowell offered his opinion that he agreed with LightSquared’s forecast that it would receive FCC approval of the License Modification Application by December 31, 2015, including the premise that a portion of the New Downlink spectrum would be made available from the NOAA Spectrum. (See Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) at Tr. 75:1-7, 15-25.) In addition, Mr. McDowell testified that he believed it was very likely that the FCC would approve LightSquared’s use of its 10
Mr. McDowell did not pick these dates; rather, he was simply given the dates reflected in the Plan. Although he testified that he had participated in and had knowledge of matters relating to LightSquared during his tenure at the FCC, he acknowledged that he is precluded by government rules and regulations from having any contact with the FCC during the two years subsequent to his departure from the agency. Accordingly, since that two year period has yet to expire, Mr. McDowell has had no contact whatsoever with FCC personnel regarding matters pending before it relating to LightSquared. (Id. at 87:1-2.) Nonetheless, he offered his opinions “based on his thirty years of experience” that the FCC will grant the License Modification Application before the end of 2015; will not require an auction of the NOAA Spectrum; and will approve use of the Lower Downlink spectrum by the end of seven years.
Although Mr. McDowell admitted that the FCC could commence a rule-making proceeding with respect to the NOAA Spectrum which could take years and acknowledged that the FCC had filed a statement in these cases indicating that it could give no “assurances about what its decision would be or the timing of the decision,”
Mr. McDowell concluded that, whether or not the FCC decides to hold an auction for the NOAA Spectrum, LightSquared’s “license modification will be granted by the end of calendar year 2015.” (Id. at 84:8-14.) Important to his conclusion in this regard were the following facts: (a) there is “more than ample time to resolve these issues” given that LightSquared’s License Modification Application has already been pending for a year and a half and there are almost two years until the end of 2015; (b) precedent transactions, including the Sprint 800 MHz rebanding and the H-block auction that resulted in DISH as the
B. Mr. Christopher Rogers
Mr. Christopher Rogers serves as a member of the three-member Special Committee of the boards of directors of LightSquared Inc. and LightSquared GP Inc., which was constituted in the fall of 2013. Against the backdrop of allegations by SPSO that the plan process was driven not by the Special Committee but by Harbinger and those parties that Mr. Falcone wished to “protect,” including Harbinger, Fortress, and JPMorgan (see SPX78), Mr. Rogers testified to his personal involvement in the plan formulation and negotiation process and that of the Special Committee. (Conf. Hr’g Tr. Mar. 19, 2014 (Rogers) 12:10-67:2.) He estimated that he had spent around 500 hours working on the Plan and related issues,
C. Mr. Douglas Smith
Mr. Douglas Smith, the Debtors’ Chief Executive Officer, testified at length about a variety of topics relating to the conduct of these cases, including the plan process and the involvement of LightSquared’s management in plan negotiations. (Conf. Hr’g Tr. Mar. 20, 2014 (Smith).) He also testified about a host of issues relating to
During his testimony, Mr. Smith explained the basis of his belief that approval of the License Modification Application by December 31, 2015 and the seven-year Lower Downlink approval process timeline were achievable. (Conf. Hr’g Tr. Mar. 20, 2014 (Smith) at 32:15-18; 131:22-25.) In support of his opinion, Mr. Smith highlighted four specific points: (i) the completion of two comment cycles with respect to use of the two upper 10MHz of uplink spectrum {id. at 33:10-12); (ii) the fact that “great progress” has been made with NOAA {id. at 40:5-7); (iii) the observation that the latest U.S. budget reflects NOAA-related costs that are not inconsistent with LightSquared’s projections and objectives {id. at 46:6-25); and (iv) the fact that a petition for rulemaking with respect to the lower 10MHz of downlink has already been filed with the FCC and could be complete in three to five years {id. at 129:13-18; 131:22-25). In addition to testifying about the FCC approval process, Mr. Smith gave substantial testimony regarding the “technical issue” raised by LBAC with respect to LightSquared’s spectrum and the basis of LightSquared’s belief that the issue does not exist or can easily be managed at minimal cost. Mr. Smith, though soft-spoken, is powerfully earnest and credible as a witness, and it is clear that he has been working tirelessly in pursuit of LightSq-uared’s business and strategic goals.
D. Mr. Marc Montagner
Mr. Marc Montagner, the Debtors’ Chief Financial Officer, gave deposition testimony regarding numerous issues, and certain portions of his videotaped deposition were designated by the parties, placed into the record, and viewed by the Court on videotape. (Mar. 6, 2014 Dep Tr. (Montagner).) Mr. Montagner testified, among other things, about (i) his participation in the plan process — which he described as “mostly being on the receiving end” {id. at 8:16-18); (ii) his preparation of financial forecasts for use in connection with the Plan {id. at 9:5-10:2); (iii) his views with respect to FCC matters; and (iv) his knowledge of the “technical issue.” Mr. Montagner was forthright in his testimony, as he has been in the past in connection with other contested hearings in these cases.
E. Mr. Steven Zelin
The Ad Hoc Secured Group called its financial advisor, Mr. Steven Zelin, of Blackstone, to testify. (Conf. Hr’g Tr. Mar. 27, 2014 (Zelin) 6:13-118:13.) Mr. Zelin detailed the various plan alternatives he had explored with the Ad Hoc Secured Group in 2013 and earlier, and he described his participation in the negotiations leading to the execution of the Plan Support Agreement in connection with the DISH/LBAC Bid.
F. Mr. Charles Ergen
Mr. Charles Ergen was called as a witness by the Ad Hoc Secured Group and testified for a full day, taking the witness stand at ten in the morning, and stepping down at approximately 7:45 in the evening. (Conf. Hr’g Tr. Mar. 26, 2014 (Ergen).) He was questioned extensively on a number of topics, having already given substantial testimony during the trial in the Adversary Proceeding relating to SPSO’s acquisition of its holdings in the LP Debt.
G. Mr. Omar Jaffrey
SPSO next called Mr. Omar Jaffrey, a principal of Melody, to testify. (Conf. Hr’g Tr. Mar. 28, 2014 (Jaffrey) 27:8-99:25.) Mr. Jaffrey testified that he con
In December 2013, Melody took on a second commitment — a $550 million commitment to the Debtors’ Second Amended Plan that included debtor-in-possession financing of $285 million. (Id. at 30:21-31:4.) Correspondence between Mr. Jaf-frey and others was introduced into evidence reflecting Melody’s view that, as of the time Melody entered into this commitment, “there was a ninety percent chance” that Mr. Ergen would purchase LightSq-uared out of the bankruptcy such that the Melody financing would never be needed. (Id. at 40:10-41:16; SPX365 (December 22, 2013 Melody investment memo).)
In January 2014, the Second Amended Plan was abandoned
H. Mr. Philip Falcone
Mr. Philip Falcone was the final witness called to testify at the Confirmation Hearing. (Conf. Hr’g Tr. Mar. 31, 2014 (Fal-cone).) The scope of Mr. Falcone’s testimony did not include matters as to which he had previously testified during the Adversary Proceeding. Called by SPSO, Mr.
III. THE MOELIS VALUATION ANALYSIS
The Debtors called Mr. Mark Hootnick of Moelis to testify in support of the valuation that undergirds the Plan and that provides the basis and support for SPSO’s treatment under the Plan. (Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick).)
In preparing Moelis’ valuation, Mr. Ho-otnick conducted extensive research and analysis over the almost two years in which he has been involved as LightSq-uared’s financial advisor and also relied on his experience with other valuation exercises of similar assets. (Id. at 129:13-18 (attesting that Moelis has “experience valuing spectrum other than in the LightSq-uared matter ... We have a telecom practice that is run by my partner Stan Holtz who’s been very involved in the entire LightSquared engagement. I’ve worked
Mr. Hootnick relied on Mr. McDowell’s opinions regarding the timing and outcome of the license modification process; he also relied on the opinions of Mr. Smith with respect to certain regulatory matters. For the purposes of preparing the Moelis Valuation Report, Mr. Hootnick assumed that the FCC would grant LightSquared a license for 30MHz of spectrum, including the 5 MHz of NOAA Spectrum, for terrestrial use, oh or before the end of 2015; he further assumed that the Lower Downlink would be approved for terrestrial use within seven years.
In preparing the Moelis Valuation Report, Moelis adopted an industry-accepted valuation method in its valuation of LightSquared, specifically the use of a market multiple comparable based on the price per MHz/POP, which reflects the market price as a function of the size of the spectrum and the number of people it covers. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 16:13-17:6 (describing the MHz/POP terminology and usage); Moelis Valuation Report at 10 (detailing, based on spectrum characteristics, LightSquared’s attractive, low-frequency spectrum with strong propagation and in-building penetration).) Moelis reviewed “comparable spectrum” transactions and, by taking into account the unique considerations relevant to each spectrum block, derived the appropriate $/MH^/POP range multiples to apply to LightSquared’s spectrum assets.
Based on the assumption that the License Modification Application would be granted by the forecasted dates, Moelis derived a “market comp range of sixty to ninety cents” per MHz/POP. (Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 22:14-24:3.) Using that determined range, Moel-is derived a value for LightSquared’s spectrum assets. To account for the fact that the License Modification Application may not be achieved until the end of 2015, Moelis discounted the derived value back to October of 2014 (the estimated date of LightSquared’s emergence from chapter 11) to determine its present value. (See id. at 22:14-24:3.) Using this generally accepted method, Moelis concluded a value of LightSquared’s Uplinks, together with the New Downlink, of approximately $4.8 billion to $7.2 billion, with a midpoint of $6 billion. (See id. at 22:14-23:13; Moelis Valuation Report at 11.)
With respect to the Lower Downlink spectrum, Moelis adopted a similar approach using the information from Mr. Smith and the expert opinion of Mr. McDowell that the Lower Downlink (located at 1526 to 1536 MHz) would be available within seven years of LightSquared’s emergence from bankruptcy. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 10:15-13:6.) Mr. Hootnick discounted that value back to present value from the outside date of October 2021, resulting in a multiple of $.26-$.39/MHz/POP, or a value of $811 million to approximately $1.22 billion, with a midpoint of $1.03 billion. (See id. at 24:4-12; Moelis Valuation Report at 11.)
Upon measuring the value of each component of LightSquared’s spectrum and satellite portfolio, Moelis provided a conclusion regarding the total enterprise value of such assets. (See Moelis Valuation Report at 11.) Mr. Hootnick opined that LightSquared’s total enterprise value is approximately $6.2 billion to $9.1 billion, with a midpoint of $7.7 billion. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 25:4-27:7 (explaining sum of valuations of LightSquared’s “U.S. spectrum value, the Canadian L-band spectrum, and the value of the satellite system”); Moelis Valuation Report at 11 (same).) After netting out certain payment obligations, LightSq-uared’s total value approximated $4.47 billion to $7.4 billion, with a midpoint of $5.96 billion. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 27:8-29:1.)
The Moelis Valuation Report is consistent with aspects of the valuations performed by the Ergen Parties. In July 2013, both Mr. Ergen and PWP performed valuations of LightSquared’s spectrum to aid the DISH Board in its consideration of whether to pursue an acquisition of LightSquared’s spectrum. (PX1047; PX1048.) Both Mr. Ergen and PWP valued LightSquared spectrum on an “as is” basis, without assuming favorable FCC modifications. (See id.)
Moelis, Mr. Ergen, and PWP incorporated the same basic spectrum valuation methodologies, assumptions, and views in their respective valuations of LightSq-uared. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 32:13-34:1 (agreeing with Mr. Ergen’s observations in the Ergen Valuation that L-Band is low band spectrum and is uniquely positioned due to its
The Ergen Valuation reflects that LightSquared LP’s spectrum assets carried an implied net primary value of up to $5.213 billion, with a midpoint of $4.277 billion. (See Ergen Valuation at 5.) The PWP Valuation reflects a $2.3 to $5.4 billion standalone valuation of LightSquared LP. (See PWP Valuation at 6.)
LightSquared, its FCC expert, and Moelis all assume that LightSquared’s Upper Downlink will be relinquished in a future spectrum swap arrangement and, accordingly, the Moelis Valuation Report does not attribute any value to the Upper Downlink. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 16:2-6; 35:12-18.) Mr. Ergen valued the Upper and Lower Down-links together, at between $312 million to $1.56 billion, with a midpoint of $936 million. (See Ergen Valuation at 5.)
IV. THE GLC VALUATION ANALYSIS
SPSO offered the expert valuation testimony of Mr. J. Soren Reynertson of GLC. (Conf. Hr’g Tr. Mar. 27, 2014 (Reynertson) 121:4-250:11.) Mr. Reynertson was paid $1.25 million dollars by SPSO for his work
Mr. Reynertson testified that he relied “100 percent” on the opinions of Mr. Hys-lop with respect to the amount of spectrum that will be available to and usable by LightSquared, including with respect to Uplink 1 and Uplink 2. (See Conf. Hr’g Tr. Mar. 27, 2014 (Reynertson) at 208:8-11; 246:15-247:7.) Despite this admission, Mr. Reynertson purported to value LightSq-uared’s assets based on GLC’s assessment of the risk associated with obtaining FCC approval for use of the spectrum, notwithstanding the fact that Mr. Reynertson was not offered as an FCC expert. (See id. at 152:9-19 (explaining, for GLC Valuation Report, “[w]hat we did was evaluate each of the individual blocks of spectrum that LightSquared either owns, leases or has an option to auction on, and evaluated the risk associated with the interference issues, which are widely known, and determined with conversations with Hyslop and the research what the ultimate available footprint might look like”); 164:19-24 (purporting to identify range of risks in spectrum blocks; 235:2-10).)
Mr. Reynertson’s analysis utilized Mr. Hootnick’s valuation methodology but changed many of the inputs, including (a) reducing the amount of available spectrum by 10 MHz by applying two 5 MHz guard bands as a result of purported interference concerns and (b) discounting the price per MHz/POP from the price used by Mr. Hootnick by assuming that LightSquared’s License Modification Application would not be approved. (GLC Valuation Report at 12.)
With respect to the reduction by 10 MHz of LightSquared’s spectrum for a guard band, the GLC Valuation Report concludes that “[ajfter resolution of the technical issues facing LightSquared spectrum, the Company will have 15-30 MHz of useable spectrum.” (GLC Valuation Report at 12; Conf. Hr’g Tr. Mar. 27, 2014 (Reynertson) at 159:21-160:6.) This reduction of LightSquared’s spectrum footprint was based, in part, on the alleged need to designate 50 percent of LightSq-uared’s Uplinks as unusable guard bands due to certain alleged interference issues.
Mr. Reynertson testified that he based his conclusions on the opinions of Mr. Hys-
Many aspects of Mr. Reynertson’s testimony are noteworthy: (i) he had never previously valued satellites or spectrum (see Conf. Hr’g Tr. Mar. 27, 2014 (Rey-nertson) at 126:14-23); (ii) he applied certain faulty and arbitrary assumptions in his valuation methodology (see fn 41, supra); and (iii) he was not provided with the valuation analyses that had been prepared by Mr. Ergen and by PWP during the summer of 2013, and, when presented with such analyses at the Confirmation Hearing, he admitted that seeing these would have helped him and may have changed what he did in connection with forming his opinions.
The GLC Valuation Report was rife with inconsistencies and flaws; it was on the whole an unimpressive piece of work and will not be afforded significant weight. In addition, a portion of Mr. Reynertson’s testimony relied on the expert opinion of Mr. Hyslop. As the Court finds that portions of Mr. Hyslop’s expert opinion shall be stricken from the record, as discussed infra, the portion of the GLC Valuation Report that relies on the stricken Hyslop testimony shall be afforded little weight.
V. CONFIRMATION TESTIMONY REGARDING THE “TECHNICAL ISSUE”
A. Mr. Douglas Hyslop
SPSO called Mr. Douglas Hyslop of Wireless Strategy LLC and SmartSky Networks LLC, engineering consulting firms which provide engineering services for wireless operators. (Conf. Hr’g Tr. Mar. 25, 2014 (Hyslop) [under seal].) SPSO retained Mr. Hyslop to provide expert testimony on the “technical issue.” Mr. Hyslop was retained on February 28, 2014 and formed his opinions by March 3, 2014; his deposition was conducted on March 8, 2014. The Debtors have moved to strike a portion of Mr. Hyslop’s testimony on the basis that it reflects, in his own words, a new opinion regarding “guard bands” that first occurred to him after he gave his deposition testimony and thus was first revealed to the Debtors at the Confirmation Hearing. (See Motion to Strike Hyslop and Reynertson at ¶¶2-3, 20-31.) The parties dispute whether or not this opinion should be considered “new” and
B. Mr. John Jacob Rasweiler V
Mr. John Jacob Rasweiler V testified as the Debtors’ rebuttal expert with respect to the “technical issue.” (Conf. Hr’g Tr. Mar. 28, 2014 (Rasweiler) [under seal].) Mr. Rasweiler is employed by Sublime Wireless, a professional engineering and services firm that provides communications services for operators and equipment providers such as Sprint, Samsung, and AT & T. He has substantial experience in radio frequency engineering and network design. In response to SPSO’s contentions with respect to the “technical issue,” Mr. Rasweiler provided credible and compelling testimony that the “technical issue” is unlikely to exist at all and that, even if it did exist, technology is available today that can eliminate the problem, rendering it a non-issue. In addition, Mr. Rasweiler identified new technology which, while not currently in commercial production, reflects further advances in certain devices that could be deployed to address the “technical issue.” Mr. Rasweiler’s testimony substantially undercut the credibility of Mr. Hyslop’s conclusions with respect to many critical aspects of the “technical issue” alleged by SPSO. (See Appendix A (filed under seal).)
DISCUSSION
I. THE PLAN CANNOT BE CONFIRMED
A. Separate Classification of Prepet-ition LP Facility SPSO Claim Complies With Section 1122
Under the Plan, the Prepetition LP Facility SPSO Claim is placed in a separate class (Class 7B) from the Prepetition LP Facility Non-SPSO Claims (Class 7A). The proffered justification for such separate classification of claims which, on their face, are identical is not equitable subordination but rather that the holder of the SPSO Claim is a competitor of the Debtors that has various non-creditor interests and that there is thus a valid business reason for separately classifying the SPSO Claim. SPSO vehemently opposes separate classification of its claim. For the reasons set forth herein, the Court finds that such separate classification is permitted by the Bankruptcy Code and applicable case law.
Section 1122(a) of the Bankruptcy Code provides that “a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.” See 11 U.S.C. § 1122(a). Although section 1122(a) specifies that a claim or an interest may only be included in a particular class if it is “substantially similar” to the other claims or interests in such class, it does not require that all similar claims be placed in a single class, nor does it address when similar claims may be placed in different classes. Stated differently, the Bankruptcy Code does not prohibit placing similar claims in separate classes.
Courts that have considered the issue, including the Court of Appeals for the Second Circuit as well as numerous courts in this District, have concluded that
One such reasonable justification for separate classification is where a claimant is a competitor of the debtor. See, e.g. In re Premiere Networks Servs., Inc., 333 B.R. 130, 133-34 (Bankr.N.D.Tex. 2005) (“a non-creditor interest in the reorganized debtor meets the ‘good business reason’ standard and justifies separate classification of the creditor’s claim”); In re Graphic Commc’ns, Inc., 200 B.R. 143 (Bankr.E.D.Mich. 1996) (holding that a rational business reason existed for classifying competitor separately from general trade creditors); In re Texas Star Refreshments, LLC, 494 B.R. 684, 696 (Bankr.N.D.Tex. 2013) (separately classifying trade creditors from competitor creditor). Importantly, it is not merely the creditor’s status as a competitor that is dispositive so much as the “non-creditor” interests that the creditor-competitor may pursue. In Premiere Networks, for example, the separately classified creditor’s “non-creditor interest” was “a different stake in the future viability of the reorganized company.” 333 B.R. at 134.
The parties also cite to In re 500 Fifth Ave. Assocs., 148 B.R. 1010 (Bankr.S.D.N.Y. 1993), but disagree on its applicability here. In 500 Fifth Ave. Assocs., the debtor isolated the unsecured deficiency claim of a secured creditor in a separate plan class from other recourse unsecured claims, arguing that such treatment was justified due to the legal distinction between non-recourse deficiency claims and other unsecured claims. Id. at 1019. The court found that separate classification was not justified because the deficiency claim of the secured lender was an allowed, unsecured claim that was no different in a bankruptcy case from the obligation owed to a recourse creditor, and it also found that the separate classification of the deficiency claim was based on the debtor’s clear desire to gerrymander an impaired accepting class to ensure confirmation of its plan. Id. The court, perhaps presaging Judge Gerber’s views in Adelphia, 368 B.R. 140, observed that the fact that a creditor’s secured claim may drive the manner in which it votes its unsecured deficiency claim (which may be contrary to
SPSO, relying on 500 Fifth Ave. Assocs., argues that a secured creditor’s “motives and agenda” cannot justify separate classification of a creditor’s claims and that the Court should focus, instead, on the legal nature of the underlying claim. The Debtors and the Ad Hoc Secured Group argue that 500 Fifth Ave. Assocs. merely addresses the separate classification of a secured creditor’s garden variety unsecured deficiency claim, and it does not address the propriety of separately classifying the claim of a competitor creditor “whose sole interest was to acquire the company by one means or another.”
While SPSO urges that the Court should decline to delve into an analysis of ulterior motives, and poses myriad hypotheticals to demonstrate instances in which evaluation of a classification scheme based on claim holder considerations would be a “complicated and arbitrary line-drawing exercise,”
While SPSO (as opposed to DISH or Mr. Ergen) is the holder of the SPSO Claim, the Court finds that, under the circumstances here, SPSO, which is wholly-owned by Mr. Ergen, the Chairman of the Board of Directors and controlling shareholder of DISH, must be considered to have interests which are aligned with those of DISH, which is a competitor of the Debtors.
Given Mr. Ergen’s interests as the sole beneficial owner of SPSO and as the Chairman of the Board of Directors and controlling shareholder of DISH, it is not hard to conjure a set of facts and circumstances in which he personally would benefit more from LightSquared’s failure than its success; stated differently, his fiduciary duties as the Chairman of the DISH Board may at some point require him to take action that is contrary to the best interests of LightSquared and contrary to his interests as a creditor (through SPSO) of LightSquared LP. As Mr. Ergen himself made clear in pursuing his so-called personal bid for LightSquared’s spectrum through LBAC, preserving optionality for DISH is a hallmark of his ongoing strategy for DISH in these cases, and more generally. See Adversary Proceeding Decision at FOF ¶ 178. Optionality for DISH should not come at the expense of the interests of LightSquared’s creditors who do not share Mr. Ergen’s economic interest in and lifelong commitment to DISH.
Since becoming a holder of LP Debt, SPSO and Mr. Ergen have acted to fur
• SPSO deliberately delayed the closing of trades of LP Debt, which created uncertainty as to ownership and impeded LightSquared’s negotiation of a consensual plan of reorganization. (Adversary Proceeding Decision at 155,166-67.)
• Mr. Ergen told the DISH Board that SPSO’s blocking position was available to facilitate an acquisition of LightSq-uared’s spectrum by DISH. (Adversary Proceeding Decision FOF ¶¶ 131— 32.)
• When DISH did not act quickly enough, Mr. Ergen himself undertook to do so, by submitting a “personal” bid for LightSquared’s most significant assets. Mr. Ergen later sold LBAC (and thus the option to purchase LightSquared’s assets through such bid) to DISH for $1. (Adversary Proceeding Decision FOF ¶¶ 136-37, 161-62.)
• SPSO and the Ergen Parties negotiated and bound the Ad Hoc Secured Group to a plan that would effectuate the DISH/LBAC Bid and prevent the Ad Hoc Secured Group from negotiating any other plan with LightSquared and its other stakeholders. (Adversary Proceeding Decision FOF ¶¶ 273-74.) In January 2014, they withdrew the DISH/LBAC Bid. (See fns 26-27, supra.)52
• Although the Ad Hoc Secured Group filed its Motion to Enforce, seeking to compel specific performance of the DISH/LBAC Bid and advance its creditor interests (which would have paid SPSO almost in full), SPSO declined to support that effort and, instead, allowed its lawyers to act for DISH and LBAC in opposing and defeating such motion. (See Objection of L-Band Acquisition, LLC to the January IS, 2014- Statement of the Ad Hoc Secured Group of LightSquared LP Lenders and Notice of Intent To Proceed with Confirmation of the First Amended Joint Chapter 11 Plan and Motion for Declaratory Relief, dated January 16, 2014 [Docket No. 1232]; Reply in Further Support of Objection of L-Band Acquisition, LLC to the January IS, 2014 Statement of the Ad Hoc Secured Group of LightSquared LP Lenders and Notice of Intent To Proceed with Confirmation of the First Amended Joint Chapter 11 Plan and Motion for Declaratory Relief, dated January 21, 2014 [Docket No. 1246]; Conf. Hr’g Tr. Mar. 26, 2014 (Ergen) at 131:12-138:4.)53
*87 • SPSO and the Ergen Parties spoke to FCC personnel about DISH’s plans for LightSquared’s spectrum should DISH ultimately acquire it. (Conf. Hr’g Tr. Mar. 20, 2014 (Smith) at 22:5-12.)
• In the first quarter of 2014, Mr. Ergen met with executives of Inmarsat on two separate occasions. At these meetings, Mr. Ergen discussed LightSquared even though LightSq-uared is currently negotiating a modification of its cooperation agreement with Inmarsat and such modification is a condition of the Plan. (Conf. Hr’g Tr. Mar. 26, 2014 (Ergen) at 188:4-190:19; 207:24-209:5.)
• SPSO and the Ergen Parties raised a “technical issue” with respect to LightSquared and insisted that notification of the purported “technical issue” be given to all parties evaluating a potential bid in the auction for LightSquared’s spectrum scheduled to occur in December 2013. (See Conf. Hr’g Tr. Mar. 27, 2014 (Zelin) at 37:25-39:21; 40:1-43:20; 57:6-18.) DISH’s engineers have been told by different vendors, including Huawei and Avago, that the “technical issue” was not an impediment to use of LightSquared’s Uplinks. One email from Huawei acknowledged Mr. Er-gen’s intent to use the “technical issue” as a device to “lower” the acquisition price for LightSquared’s spectrum. (PX1026.)
• SPSO has argued that the NOAA Spectrum should and would be auctioned, an argument which is not consistent with the interests of an ordinary, non-competitor creditor. (See Objection of SPSO to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1408] at 37-38; Conf. Hr’g Tr. Mar. 20, 2014 (Smith) at 23:8-17.)
While SPSO maintains that is not a competitor of the Debtors because, although it is affiliated with DISH and EchoStar, those companies are in the pay television business while the Debtors own spectrum “but have no ability or authority to use it for commercial purposes,”
The fact that the Ergen Parties are competitors of LightSquared is bolstered by the fact that DISH was listed as a “Disqualified Company” under the Pre-petition LP Credit Agreement and, as a result, was prohibited from purchasing LP Debt. (Adversary Proceeding Decision FOF ¶¶ 22, 25, 26.) Mr. Ergen’s testimony, as well as the testimony of SPSO’s valuation expert, Mr. Reynertson, supports the conclusion that DISH and LightSq-uared are currently competitors, and would continue to be competitors upon LightSquared’s emergence from chapter 11. (See, e.g., Mar. 26, 2014 Conf. Hr’g Tr. (Ergen) at 279:18-282:2; 328:15-330:2; Mar. 27, 2014 Conf. Hr’g Tr. (Reynertson) at 209:11-13.) Even if the status of DISH and EchoStar as competitors of LightSq-uared were not imputable to Mr. Ergen and SPSO (which it is), SPSO is clearly an affiliate of such entities and, by virtue of such affiliation and the common control exercised by Mr. Ergen with respect to these entities, SPSO is properly viewed as a competitor of the Debtors.
For all of these reasons, the separate classification of the Prepetition LP Facility SPSO Claim is thus necessary and appropriate. SPSO must be viewed as a com
B. SPSO’s Vote to Reject the Plan Shall Not Be Designated
Section 1126(e) of the Bankruptcy Code provides that a bankruptcy court may designate the vote of “any entity whose acceptance or rejection of [a] plan was not in good faith.” 11 U.S.C. § 1126(e). The seminal decision in this Circuit addressing vote designation is the Second Circuit’s 2011 decision in In re DBSD N. Am., Inc., 634 F.3d 79 (2d Cir. 2011), in which the court made the following observations:
The Code provides no guidance about what constitutes a bad faith vote to accept or reject a plan. Rather, § 1126(e)’s “good faith” test effectively delegates to the courts the task of deciding when a party steps over the boundary. ... Bankruptcy courts should employ § 1126(e) designation sparingly, as “the exception, not the rule.... Merely purchasing claims in bankruptcy “for the purpose of securing the approval or rejection of a plan does not of itself amount to ‘bad faith.’ ” Nor will selfishness alone defeat a creditor’s good faith; the Code assumes that parties will act in their own self interest and allows them to do so.... Section 1126(e) comes into play when voters venture beyond mere self-interested promotion of their claims. “[T]he section was intended to apply to those who were not attempting to protect their own proper interests, but who were, instead, attempting to obtain some benefit to which they were not entitled.” A bankruptcy court may, therefore, designate the vote of a party who votes “in the hope that someone would pay them more than the ratable equivalent of their proportionate part of the bankrupt assets,” or one who votes with an “ulterior motive,” that is, with “an interest other than an interest as a creditor.”
/¿at 101-102 (all citations omitted). Moreover, votes cast by parties who purchase claims in a competitor’s bankruptcy case are viewed by courts as being particularly worthy of scrutiny. Id. at 105, n. 12 (citations omitted); see also In re Allegheny Int’l, Inc., 118 B.R. 282, 296 (Bankr.W.D.Pa. 1990).
As described in greater detail in the Vote Designation Motion and the Ad Hoc Secured Group’s joinder to that motion [Docket No. 1384] (the “Vote Designation Joinder”), the Debtors maintain that (i) Mr. Ergen’s attempt to secure control of the LP Debtors’ assets by purchasing a blocking position in the LP Debt is precisely the behavior the Second Circuit attempted to deter and punish in DBSD and (ii) the behavior of SPSO in these cases is even worse than the behavior of DISH in DBSD. (See Vote Designation Motion at ¶¶ 69-85; Vote Designation Joinder at ¶¶ 10, 14, 16-17.) They allege the following in support of their conclusion:
*90 • SPSO and the Ergen Parties have followed the DBSD and TerreStar “playbooks” to gain control of a company in distress by buying claims and manipulating the chapter 11 process for their non-creditor interests, but, in this case, they did so with stealth.
• SPSO’s purchase of the LP Debt at close to par to acquire a blocking position was part of Mr. Ergen’s scheme and not simply, as he testified, to obtain higher returns or to ensure he had “bankruptcy protections” against cramdown.
• Mr. Ergen’s overall interest in these cases (as an owner of LP Debt through SPSO and as the majority equity owner of DISH) gives him incentives to help DISH achieve as low a purchase price for the Debtors’ assets as possible, in direct contravention of his interests as a creditor.
• Rather than acting in its interests as a creditor, SPSO opposed a near full recovery in cash under the Ad Hoc Secured Group’s plan by authorizing its counsel to object to the Ad Hoc Secured Group Motion to Enforce and to seek a declaratory judgment that the DISH/LBAC Bid was terminated.60
And, once again, the Debtors and the Ad Hoc Secured Group urge that the bad acts of all Ergen Parties other than SPSO should be imputed to SPSO for purposes of vote designation. (See Corrected Post-Trial Confirmation Brief of the Ad Hoc Secured Group of LightSquared LP Lenders [Docket No. 1494] at 70 (pointing out that “[i]f this were not the case, it would be easy to eviscerate the protections intended by section 1126(e) by simply forming multiple entities and having one buy claims while the others engaged in disruptive inequitable conduct — exactly as the Ergen Parties did here”).) While there is certainly truth to such an observation, those are not the facts before the Court with respect to vote designation. Moreover, whether or not the alleged bad acts of all the Ergen Parties (including LBAC) can be imputed or attributed to SPSO, the Court finds that SPSO’s vote to reject the Plan cannot be designated.
What the Debtors and the Ad Hoc Secured Group ignore is the fact that, as will be discussed in detail below, the Third Amended Plan is uneonfirmable for a variety of reasons, not the least of which is the unpalatable treatment it affords the SPSO Claim. Where a creditor votes to reject a plan for an admixture of reasons, some of which can be characterized as being consistent with the interests of a creditor acting to protect its legitimate creditor interests, its vote cannot be designated. SPSO has voted against a plan that not only deprives it of its first lien security interest but provides it with plan consideration that is virtually indistinguishable from equity interests. It is not at all surprising that SPSO declined to accept such treatment; the other members of the Ad Hoc Secured Group would most certainly have done likewise. Indeed, Mr. Falcone could not even interest Mr. McKnight in taking that treatment on account of the LP Preferred Equity Interests held by Fortress.
While courts in this District and elsewhere have held that casting a vote on a plan to gain more than one deserves is evidence of bad faith, it takes more than evidence of simply a selfish or aggressive attempt to maximize recovery to demonstrate bad faith. See, e.g., Adelphia, 359 B.R. 54, 63-64 (Bankr.S.D.N.Y. 2006) (declining to designate votes of creditor who held claims against two different Adelphia debtors and who cast votes with respect to one set of claims with ulterior purpose of increasing its recovery on the claims it held against another debtor). Judge Gonzalez had occasion to analyze the issue of alleged “mixed-motive” voting post-DNS© in the case of In re GSC, Inc., 453 B.R. 132 (S.D.N.Y. 2011). In GSC, there were allegations that a creditor, Black Diamond, had voted against a plan in order to pursue a sale transaction that would have given it more than its ratable share of the debtors’ assets. In analyzing whether there was evidence to this effect, Judge Gonzalez observed that, even if there were such evidence, the objectors would have needed to establish Black Diamond’s intent to pursue this alternative at the time of voting and that, even if the objectors could have succeeded in making such a showing, the objectors would “have had to further prove that Black Diamond’s sole or primary goal in rejecting the [p]lan was to benefit at the expense of other
The Debtors would have the Court conflate the provisions of section 1126(e) and section 510(c) and hold that a finding of inequitable conduct sufficient to support equitable subordination of a creditor’s claim necessarily translates into the basis for designating the bad actor’s vote. Moreover, the Debtors would seek to transform vote designation into a substantive treatment provision. The Court de-dines to read section 1126(e) so broadly; in the plain words of the statute, designation may be ordered with respect to “any entity whose acceptance or rejection of such plan was not in good faith.” It is vote-specific and plan-specific. It focuses on the voting conduct of the creditor holding the claim. Simply put, had SPSO voted to reject a plan that proposed to pay it in full in cash or a plan proposing that SPSO receive some other treatment that was accepted by the non-SPSO holders of LP Debt, SPSO’s good faith in rejecting such a plan would be open to serious question. Indeed, as SPSO itself ironically points out in drawing a distinction between this case and DBSD, “[i]t is one thing to designate a creditor that votes against a [p]lan that manifestly compensates the designated stakeholder’s economic expectations in full ” but quite another thing to designate SPSO’s vote on this Plan.
C. Because SPSO’s Vote Cannot be Designated, the Cramdown Requirements of Section 1129(b) Are Applicable to Class 7B
Pursuant to section 1129(b)(1) of the Bankruptcy Code, the Court may confirm a plan over a dissenting impaired class of claims so long as the plan is “fair and equitable” and does not “discriminate unfairly” with respect to the dissenting class. 11 U.S.C. § 1129(b)(1). See, e.g., Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 650
1. The Plan Is Not Fair and Equitable With Respect to Class 7B
A plan is fair and equitable with respect to a class of secured claims if it satisfies one of the three alternatives set forth in section 1129(b)(2)(A). The plan must provide (i) that the holders of such claims (a) retain their liens on the same collateral, to the extent of the allowed amount of such claims and (b) receive deferred cash payments of a value equal, as of the effective date of the plan, to the value of the secured creditors’ interests in the estates’ interests in such collateral; (n) for the sale of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens to comply with clause (i) or (iii) of section 1129(b)(2)(A) (a provision which the parties agree is not applicable here); or (iii) for the realization by such holders of the indubitable equivalent of such claims. 11 U.S.C. § 1129(b)(2)(A).
The Plan is not fair and equitable with respect to Class 7B. Although the parties here disagree as to whether the Plan must comply with section 1129(b)(2)(A)® or section 1129(b)(2)(A)(iii) with respect to SPSO, see RadLAX Gateway Hotel, LLC v. Amalgamated Bank, - U.S. -, 132 S.Ct. 2065, 2072, 182 L.Ed.2d 967 (2012), the Plan fails to satisfy either subsection. On its face, the Plan does not comply with subsection (A)(i) inasmuch as it replaces SPSO’s first lien with a third lien. Since the SPSO Claim will not be subordinated in its entirety, the analysis of this species of “fair and equitable” treatment ends there.
Nor does the Plan fare better under section 1129(b)(2)(A)(iii), which requires the realization by the creditor of the “indubitable equivalent” of its claims. 11 U.S.C. § 1129(b) (2) (A) (iii). In DBSD, the bankruptcy court held that, although “indubitable equivalent” is not defined in the Bankruptcy Code, “courts generally will find the requirement satisfied where a plan both protects the creditor’s principal and provides for the present value of the creditor’s claim.” DBSD, 419 B.R. at 207 (citing In re Sparks, 171 B.R. 860, 866 (Bankr.N.D.Ill. 1994)). The court continued, stating that “courts focus on the value of the collateral relative to the secured claim, and the proposed interest rate of the facility providing the indubitable equivalent.” Id. Courts have held that the “indubitable equivalent” standard requires that there be no doubt that replacement recoveries are equal to existing security interests. See In re Philadelphia Newspapers, LLC, 599 F.3d 298, 310 (3d Cir. 2010) (“Thus the ‘indubitable equivalent’ under subsection (iii) is the unquestionable value of a lender’s secured interest in the collateral.”); see also In re Salem Suede, Inc., 219 B.R. 922, 935 (Bankr.D.Mass. 1998) (requiring that “there [be] no reasonable doubt that [the subject creditor] will receive the full value of what it bargained for”) (internal citation omitted).
Here, the Plan proposes to give SPSO the SPSO Note, which (i) accrues PIK interest at the rate of LIBOR plus twelve percent, (ii) has a seven year maturity, and (iii) is secured by a third-priority lien on all of the assets of the New LightSquared Entities. SPSO argues that the SPSO Note does not represent the indubitable equivalent of its claim because, among other things, (a) the value of such note will be highly speculative as of the Effective Date of the Plan; (b) such note does not provide for postpetition interest accrued through
The Debtors submit that the SPSO Note will provide SPSO with the indubitable equivalent of its claim by providing SPSO with payment in full. To determine whether the SPSO Note provides for the indubitable equivalent of the SPSO Claim, the Debtors suggest that the Court must (i) compare the value of the collateral securing the SPSO Note to the value of the SPSO Claim to ensure SPSO’s principal is protected and (ii) analyze the interest rate and maturity of the SPSO Note to ensure SPSO is receiving the present value of its claim; if an equity cushion can be shown, the Debtors argue, indubitable equivalence is established. (See Conf. Hr’g Tr. May 6, 2014 at 70:1-81:4.) Pointing to the Moelis Valuation Report, a collateral valuation with a midpoint of $7.7 billion, the Debtors argue that the full principal value of the SPSO Claim would be more than sufficiently protected by a third-lien note on the existing collateral securing the Prepet-ition LP Facility. (See id.)
Nevertheless, to “erase any shadow of doubt (to the extent any such doubt existed), that SPSO was not receiving fair and equitable treatment,”
SPSO disagrees entirely. In addition to disputing the Debtors’ valuation and projections, SPSO argues that the third lien it will receive under the SPSO Note cannot satisfy indubitable equivalence where SPSO currently purports to enjoy a first lien. (Objection of SPSO to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1408] at ¶¶ 82-87).
While some courts have held that a subordinated lien can constitute the indubitable equivalent of a secured creditor’s claim under section 1129(b)(2)(A)(iii), such cases are few and far between. See, e.g., Woods v. Pine Mountain, Ltd. (In re Pine Mountain, Ltd.), 80 B.R. 171, 174-75 (9th Cir. BAP 1987) (finding indubitable equivalent where secured creditor received new promissory notes junior only to a construction loan); Affiliated Nat’l Bankr-Englewood v. TMA Assocs., Ltd., 160 B.R. 172, 176 (D.Colo. 1993) (holding that secured creditor received indubitable equivalent despite payment in full to partially junior and partially senior creditor). No cases from courts in this District have been cited to the Court in support of this contention. Moreover, in each case cited by the Ad Hoc Secured Group in support of its indubitable equivalence argument, the court found that the secured creditor in question was demonstrably oversecured and that the creditor’s equity cushion protected it from any diminution of its security interest. In In re Pine Mountain, for example, the 9th Circuit B.A.P. based its determination that the secured creditor received the indubitable equivalent of its claim on the fact that the creditor’s claim “would still be fully secured” even after obtaining a senior construction loan. 80 B.R. at 174-75. Similarly, in Affiliated Nat’l Bank-Englewood, the court based its holding on the bankruptcy court’s determination that property securing the creditor’s $1 million claim was worth between $1.8 million and $2.0 million. 160 B.R. at 174-75.
The Debtors readily concede that, although the Plan is not conditioned on FCC approval, the Debtors’ valuation of the SPSO Note and SPSO’s proposed recovery thereunder indeed rely on opinions offered at the Confirmation Hearing that the FCC will approve LightSquared’s pending License Modification Application and the later use of its lower downlink spectrum.
There is enormous disagreement on valuation, however. Not surprisingly, the Debtors and the Plan Support Parties, on the one hand (with the vocal support of the Ad Hoe Secured Group), and SPSO, on the other hand, have drastically different views on valuation. Mr. Ergen himself prepared a valuation of the Debtors’ spectrum assets, as did PWP when it issued a fairness opinion for the DISH Special Committee in connection with the now-terminated DISH/LBAC Bid. Of course, the assumptions underlying each of these valuations are radically different from one another, with respect to variables such as the appropriate price per MHz/POP metric, the impact of FCC approval on the License Modification Application, the proposed use of each block of spectrum, and the question of whether or not there is a “technical issue” with respect to portions of the spectrum.
The Court makes the following findings with respect to valuation.
a. The Moelis Valuation As the Debtors readily concede, the value of LightSquared’s assets is central to the determination of the feasibility of the Plan and the appropriateness of the treatment of the SPSO Claim. Under the direction of Mr. Hootnick, Moelis prepared a valuation analysis of LightSquared’s assets that reflects a range of value from $6.2 billion at the low end to $9.1 billion at the high end. The methodology employed by Moelis is industry-accepted and indeed does not differ in any material respect from the methodology used by SPSO’s valuation expert, or from the methodology used in the valuations performed by PWP for the DISH Special Committee or by Mr. Ergen himself. The methodology employs market comparables based on the price per MHz/POP, which reflects, among other things, the market price as a function of the size of the band of spectrum and the number of people it covers. Spectrum characteristics are also taken into account, including, for example, the propagation characteristics of the spectrum. (See Moel-is Valuation Report at 10; Mar. 24, 2014 Conf. Tr. (Hootnick) at 16:13-20:5.) Moel-is relied on the opinions of Mr. Smith, Mr. McDowell, and Mr. Jeffrey Carlisle, LightSquared’s EVP for Regulatory Affairs, that the FCC will grant LightSq-uared’s License Modification Application by the end of 2015 and will approve the use of the Lower Downlink in seven years. Mr. Hootnick’s qualifications as an expert are stellar; Moelis’ experience in valuing complex assets in the telecommunications space is broad and deep; and the methodology employed in the Moelis Valuation Report is clearly consistent with industry standards. But because the Moelis Valuation rests almost entirely on unsupportable assumptions about the timing of FCC approvals, the Court is unable to afford it weight sufficient to support the valuation premise of the Plan.
b. The GLC Valuation
The GLC Valuation Report offered by SPSO suffered from many infirmities and inconsistencies. On the one hand, Mr. Reynertson purported to have relied on
c.The Ergen Valuation
In connection with the consideration of Mr. Ergen’s LBAC bid by the DISH Board and the DISH Special Committee, Mr. Ergen prepared the Ergen Valuation, a six-page presentation, dated July 3, 2013, entitled “Strategic Investment Opportunity — L-Band Acquisition, LLC.” (PX1047.) The Ergen Valuation reflects Mr. Ergen’s analysis of the aggregate value of LightSq-uared’s assets to DISH, comprised of (a) the value of 20 MHz of the LightSquared spectrum and satellites themselves and (b) the incremental value that would be realized by DISH due to the substantial additional value that LightSquared’s spectrum would bring to DISH’s existing AWS-4 spectrum. The range of value for the former, per Mr. Ergen, is $3.3 billion to $5.2 billion; the range of value for the latter (ie., inclusive of DISH supplemental asset value) is $5.1 billion to $8.9 billion. The Ergen Valuation includes a higher range of $/MHz /POP than the Moelis Valuation ($0.65 to $0.95 versus $0.60 to $0.90). SPSO has attempted to retreat from the numbers reflected in the Ergen Valuation on the grounds that it does not reflect the negative effect of the “technical issue.” As the Court repeatedly observed during the Confirmation Hearing, however, no attempt was ever made by DISH to solve (let alone quantify) the “technical issue” which allegedly stood in the way of the realization by DISH of billions of dollars of supplemental asset value. It is indeed a curious thing. The Ergen Valuation, while offering strong support for the proposition that LightSquared’s assets have tremendous value in the hands of DISH, does not provide sufficient support for the valuation on which the Plan and the treatment of the SPSO Claim are premised.
d.The PWP Valuation
In addition to the Ergen Valuation, a valuation prepared by PWP was considered by the DISH Special Committee. (PX1048.) PWP was retained by the DISH Special Committee to issue a fairness opinion with respect to the potential $2.2 billion DISH/LBAC Bid in July 2013. In connection with its assignment, PWP performed an extensive valuation analysis of LightSquared’s assets and concluded that “the cumulative value ... is estimated to be $4.4 billion to $13.3 billion.” (PWP Valuation at 39.) This valuation range includes the stand-alone value of LightSq-uared’s spectrum and an estimate of the magnitude of the ways in which the LightSquared spectrum would enhance the value of DISH’s existing and planned businesses.
e.Additional Valuation Issues
In order to demonstrate the existence of an equity cushion, the Debtors point not only to the Moelis Valuation Report but also to (i) the Ergen Valuation, which yields an approximately 23 percent “equity cushion” (not including value attributable
Based on all of the valuation evidence in the record, it is clear that LightSquared is indeed the owner of valuable spectrum assets — unbuilt “beachfront property”
Because the Debtors’ asset valuation does not support the valuation on which
2. The Plan Unfairly Discriminates Against Class 7B
Contrary to the requirement of section 1129(b)(1) of the Code, the Plan discriminates unfairly against Class 7B. While the “currency” with which the Pre-petition LP Facility SPSO Claim is paid (i.e., the SPSO Note) does not have to be exactly the same as that provided to the Prepetition LP Facility Non-SPSO Claims, there must nonetheless be a determination that the treatment afforded SPSO does not discriminate unfairly against SPSO. The purpose of the requirement is to ensure that a dissenting class will receive relative value equal to the value given to all other similarly situated classes. In re Johns-Manville Corp., 68 B.R. 618, 686 (Bankr.S.D.N.Y. 1987); see also In re Sea Trail Corp., No. 11-07370-8, 2012 WL 6247175, at *9 (Bankr.E.D.N.C. Oct.- 23, 2012) (holding that a chapter 11 plan providing one class of unsecured creditors with proceeds of asset sales and avoidance actions and another class of unsecured creditors with title to a sewer facility and assignment of a sewer service agreement was not unfairly discriminatory); In re Hawaiian Telcom Commons, Inc., 430 B.R. 564, 605 (Bankr.D.Haw. 2009) (plan that awards cash to general unsecured creditors and warrants to unsecured senior noteholders does not unfairly discriminate; section 1129(b) of the Bankruptcy Code does not preclude a plan’s disparate treatment of classes of same-priority claims, it prohibits only unfair discrimination); In re Greate Bay Hotel & Casino, Inc., 251 B.R. 213, 222-23, 231-32 (Bankr.D.N.J. 2000) (chapter 11 plan providing undersecured noteholders with new notes and new common stock on account of their deficiency claims but other unsecured creditors with cash was not unfairly discriminatory because the debtors’ value was determined to be sufficient to ensure payment).
To determine whether a plan discriminates unfairly, courts consider whether (i) there is a reasonable basis for discriminating, (ii) the debtor cannot consummate the plan without the discrimination, (iii) the discrimination is proposed in good faith, and (iv) the degree of discrimination is in direct proportion to its rationale. In re WorldCom, Inc., 2003 WL 23861928, *59-60, 2003Bankr.LEXIS 1401, *174-175 (Bankr.S.D.N.Y. Oct. 31, 2003) (citations omitted). The Debtors argue
At a minimum, the treatment proposed in the Plan clearly does not pass muster under prongs (i) and (iv) of the WorldCom test, and likely falls short on the “good faith” prong as well. Simply put, it is difficult to imagine discrimination that could be much more unfair than that contemplated by the Plan: close to full cash payment on confirmation (not the Effective Date) for Class 7A versus an equity-like deeply subordinated seven year third-lien PIK interest note for Class 7B — treatment that, even if possibly yielding payment of the value of the SPSO Claim seven years down the road, for all intents and purposes puts SPSO at the mercy of the rest of the proposed post-confirmation capital structure, including the equityholders below it. {See, e.g., Conf. Hr’g Tr. Mar. 31, 2014 (Falcone) at 108:9-25 (testifying regarding $150 million call option of Harbinger that would be part of the second lien and above SPSO); Conf. Hr’g Tr. Mar. 24, 2014 (Ho-otnick) at 68:7-25 (describing LightSq-uared’s future ability pursuant to the Plan to raise another $500 million which would come in ahead of the second lien debt and the SPSO Note).)
While some discrimination in this case may be necessary to address the non-creditor/competitor interests of SPSO, see Section I.A., supra, the Plan’s treatment of Class 7B is not designed to achieve that goal. The legitimate business reasons for separately classifying the SPSO Claim hardly entitle the Debtors to discriminate against SPSO in ways that far exceed those necessary to address the legitimate concerns attendant to SPSO’s competitor status and connections to DISH, e.g., through appropriate covenants and other non-economic protective measures. Moreover, the fact that, as Mr. Smith testified, SPSO is getting a “promissory note” because “there’s not enough cash for everybody to receive cash” does not provide a legitimate basis for the Plan’s discriminatory treatment of Class 7B. (Conf. Hr’g Tr., Mar 20, 2014 (Smith) at 26:18 -27:14.) Nor is it a justification for such discrimination to point to the fact that, as some have observed, the Ad Hoc Secured Group “requires” early payment in full in cash. {See, e.g., Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 45:4D7 (“And [the plan] satisfies the requirement of certain constituents, particularly the non-SPSO lenders who have been promised an early pay-out by the LBAC approach [and] who have required throughout that they be paid off
D. The Claim of SPSO Shall Be Subordinated to the Extent of Harm Caused to Innocent Creditors
As set forth in detail in the Adversary Proceeding Decision, the Court has concluded that SPSO has engaged in inequitable conduct in connection with its acquisition of its now nearly $1 billion LP Debt claim. Although the Confirmation Hearing did not encompass a re-trial of those issues that were presented and have now been adjudicated in connection with Adversary Proceeding, there are additional allegations of inequitable conduct that were raised in connection with confirmation. In essence, the Ad Hoc Secured Group maintains that they were the victims of an elaborate “bait and switch” strategy perpetrated by Mr. Ergen through SPSO, LBAC, and DISH. The strategy was allegedly hatched in a presentation prepared by Mr. Ergen’s counsel in late April 2013 and presented by Mr. Ergen to the DISH Board in May 2013, which stated, among other things, that Mr. Ergen wanted to “see [the] results of [the] marketing process and, if [the] process is unsuccessful, revert with [a] different bid later.” (See Adv. Pro. Ex. PX0867; Adversary Proceeding Decision FOF ¶¶ 131-32.) There, says the Ad Hoc Secured Group, it is made crystal clear that the Ergen-led strategy was to make a bid, wait and see if anyone else is interested in the LightSquared assets at that price, and if not, pull the bid and come back later with a lower bid. “Had they only known,” say the members of the Ad Hoc Secured Group, they would never have gone down that path. But now, pointing again and again to the DBSD and Terrestar “playbooks” as evidence of Mr. Ergen’s modus operandi for acquiring distressed assets, the Ad Hoc Secured Group complains that it was deceived into signing up for a deal that Mr. Ergen never intended to close.
Not surprisingly, there is no documentary evidence reflecting the alleged “bait and switch” strategy. Mr. Ergen’s May 2, 2013 DISH Board presentation,
Moreover, the words and behavior of Mr. Ergen in connection with the December 11 auction are not exactly what one would expect to hear and see from a stalking horse bidder who had snagged assets that were worth, in DISH’s hands, billions of dollars of net incremental value. Why would Mr. Ergen fly to New York to attend the auction with a sizeable team of DISH personnel and the DISH Board on standby
Nonetheless, the fact remains that the LBAC transaction was tied to the achievement of certain milestones set forth in the PSA.
Whether LBAC terminated its bid because it “believed” there was a technical issue (even though the record does not support a finding that there was or is such an issue), or because it wanted to make a lower conditional bid, or because Mr. Er-gen decided to direct DISH and its capital elsewhere, or because of negative implications for DISH in connection with the Nevada shareholder litigation, remains unclear. What is in undisputable, however, is that the actions of Mr. Ergen in this regard defy logical explanation. Mr. Er-gen was particularly evasive when asked at the Confirmation Hearing about his reasons for coming to the December 11 auction fully prepared to proceed, and then terminating his bid shortly thereafter.
II. ADDITIONAL OBJECTIONS TO THE PLAN
SPSO has raised numerous additional objections to confirmation of the Plan including: the failure to satisfy the “best interests of creditors” test under section 1129(a)(7) of the Code; the failure of the Plan to contain projections that extend beyond the first quarter of 2016; the im-permissibility of the Plan’s proposed Non-Debtor Releases; the effect of the Plan on SPSO’s inter-creditor rights under the Prepetition LP Credit Agreement; certain infirmities with the proposed New DIP Facility, including its alleged lack of adequate protection; the alleged artificial impairment of certain accepting classes; the Debtors’ failure to demonstrate that the Plan is feasible; and the Debtors’ alleged lack of good faith in soliciting acceptances of the Plan under section 1125(e). While there may be merit to several of these additional objections, the Court need not address them now in light of the other bases on which the Court has denied confirmation of the Plan.
One final observation is in order. This Court has previously ruled, in this case, that the Bankruptcy Code does not contemplate or permit equitable disallowance of a creditor’s claim.
CONCLUSION
For all of the foregoing reasons, (i) confirmation of the Third Amended Joint Plan is denied; (ii) SPSO’s Motion to Strike McDowell and Hootnick is denied; (iii) the Debtors’ Motion to Strike Hyslop and Rey-nertson is granted as to Mr. Hyslop and denied as to Mr. Reynertson; (iv) the Vote Designation Motion is denied; (v) the New DIP Motion and its request for related relief, including the request to approve the Plan Support Party Break-up Fee, is denied, as moot; (vi) the' Exhibit 2 Motion is denied; and (vii) the request for equitable subordination of the SPSO Claim is granted for the reasons set forth in the Adversary Proceeding Decision, with the extent of such subordination to be determined in further proceedings to be held in this Court. Counsel to the Debtors shall be provided with an unredacted copy of Appendix A and shall distribute it to those parties entitled to receive it pursuant to applicable confidentiality agreements and sealing orders.
IT IS SO ORDERED.
APPENDIX A
FILED UNDER SEAL
[redacted]
. In re DBSD North America, Inc., 421 B.R. 133 (Bankr.S.D.N.Y. 2009); In re DBSD North America, Inc., 634 F.3d 79 (2d Cir. 2011) (together, “DBSD ").
. Harbinger Capital Partners LLC v. Ergen (In re LightSquared Inc.), Adv. Pro. 13-1390-scc (Bankr.S.D.N.Y.) (the “Adversary Proceeding”).
. This Decision supersedes this Court’s Bench Decision read into the record on May 8, 2014.
.The findings of fact and conclusions of law herein shall constitute the Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any finding of fact later shall be determined to be a conclusion of law, it shall be so deemed, and to the extent any conclusion of law later shall be determined to be a finding of fact, it shall be so deemed.
. See Memorandum Decision Granting Motions to Dismiss Complaint [Adv. Docket No. 68], 504 B.R. 321 (Bankr.S.D.N.Y. 2013).
. SPSO, DISH, EchoStar, Mr. Ergen, and LBAC will be referred to collectively herein as the "Ergen Parties.”
. Post-Trial Findings of Fact and Conclusions of Law, [Adv. Docket No. 165], 511 B.R. 253 (Bankr.S.D.N.Y. 2014). Additional background on the Chapter 11 Cases and Adversary Proceeding can be found in the Adversary Proceeding Decision.
. Docket No. 936.
. The Plan was subsequently modified several times. See Docket Nos. 1336, 1422, and 1482.
. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, DIP Inc. Facility Claims, DIP LP Claims, New DIP Claims, U.S. Trustee Fees, and Priority Tax Claims are not classified in the Plan.
. "Prepetition LP Facility Claims” refers to claims held by the Prepetition LP Agent or the Prepetition LP Lenders arising under, or related to, the $1,500,000,000 term loan credit facility provided in connection with the Pre-petition LP Credit Agreement, dated as of October 1, 2010, by and among LightSquared LP and certain of its affiliates and the Prepetition LP Lenders thereunder. "LP Debt” refers to the secured debt of LightSquared LP issued pursuant to the Prepetition LP Credit Agreement.
. Pursuant to the Plan, such claimants may also elect to receive Plan consideration in the form of New DIP Tranche B Claims (for Converted Prepetition LP Facility Non-SPSO Claims).
. The Plan provides that Class 7B will receive the "SPSO Option A Treatment” or the "SPSO Option B Treatment,” depending on whether SPSO votes to accept the Plan. Given that SPSO has voted to reject the Plan, it would receive the SPSO Option B Treatment, discussed herein.
. Pursuant to the Plan, this $ 115 million will be converted into equity junior to the proposed SPSO Note. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 55:1-12.)
. The Specific Disclosure Statement contained form agreements and/or related documents with respect to various Plan Supplement documents, including the First Lien Exit Credit Agreement, Reorganized LightSquared Inc. Loan, and New LightSquared Entities Corporate Governance Documents [Docket No. 1308]. This filing also contained copies of the SPSO Note Documents, the Schedule of Assumed Agreements, and the Schedule of Retained Causes of Action. On February 17, 2014, LightSquared filed a Notice of Filing of Plan Supplement Documents for Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code [Docket No. 1312], attaching copies of the Second Lien Exit Credit Agreement and NewCo Interest Holders Agreement.
On March 18, 2014, LightSquared filed a Notice of Filing of (A) Modified Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code and (B) Accompanying Confirmation Order [Docket No. 1422]. On March 21, 2014, LightSquared filed a Notice of Filing Relating to Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code [Docket No. 1433], attaching (a) Highly Confident Letters from J.P. Morgan Securities LLC and Credit Suisse Securities (USA), LLC Relating to First Lien Exit Credit Agreement, (b) the Pro Forma Ownership Summary for NewCo, and (c) a list of officers for the New LightSquared Entities (indicating that the identities of the directors of the New LightSquared Entities would be disclosed in a further supplement to the Plan). On March 31, 2014, LightSquared filed a Notice of Filing Relating to Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code [Docket No. 1456], attaching the Initial List of Directors for the New LightSquared Entities, subject to further supplement prior to the close of the Confirmation Hearing.
. This Decision does not address the KEIP Supplement, which remains sub judice.
. Exhibit 2 (SPX002), produced by a non-party, has not been properly authenticated, contains multiple layers of hearsay, and does not fall under any exception to the prohibition on hearsay. Moreover, the Exhibit 2 Motion, dated April 30, 2014, was filed well after the close of the evidentiary record on confirmation, rendering it procedurally improper. For these reasons, the Exhibit 2 Motion is denied and Exhibit 2 is excluded from the record.
. In September 2013, the Court ordered the appointment of the Special Committee of the Boards of Directors of LightSquared Inc. and LightSquared GP Inc. (the "Special Committee”) to direct many of LightSquared’s significant actions with respect to these Chapter 11 Cases. (See Docket No. 866; PX0755; PX0789.)
.In late 2013, SPSO, DISH, and LBAC raised what has been referred to as a "technical issue” with LightSquared's spectrum which would allegedly be an impediment to the use of certain LightSquared uplink spectrum. The Debtors submitted both documentary evidence and the live testimony of Mr. Rasweiler at trial in support of their position that that the "technical issue” poses no impediment to the use of LightSquared’s spectrum and does not impact the value of
. See General Disclosure Statement [Docket No. 918] at 39-40.
. SPSO's valuation expert, Mr. Reynertson, testified that "[t]he lower downlink block is still subject to controversy, and as highlighted by Mr. Smith's presentation, and so ultimately, we felt that there was a range of outcomes here.” (Conf. Hr’g Tr. Mar. 27, 2014 (Rey-nertson) at 158:1-3.)
.As an FCC Commissioner, Mr. McDowell’s duties included consideration of, and decisions regarding, spectrum issues involving satellite, media, and wireless companies. (See PX1078 at 2.)
. See Statement Regarding the FCC Exit Condition in Debtors’ Revised Second Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code, dated January 17, 2014 [Docket No. 1235] (the “FCC Statement”). Mr. McDowell concluded that the FCC Statement did not change his opinion for two key reasons. First, he opined that the FCC Statement in this case is a "fairly routine filing for the Commission to preserve all of its legal options and [the statement] doesn't reach any conclusions.” (Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) at 81:22-82:4.) Second, Mr. McDowell noted that the FCC Statement "speaks to the second amended plan ... which had a contingency of resolution at the FCC or grants by the end of this calendar year, 2014. And the third amended plan does not have such a contingency.” (Id. at 82:5-10.)
. At the Confirmation Hearing, Mr. McDowell noted that the window for lodging such formal objections to the License Modification Application had closed over a year ago. (Conf. Hr’g Tr. Mar. 19, 2014 (McDowell) at 78:1-11; 78:25-80:9.)
. Mr. Rogers testified that he personally spent more than five hundred hours on the work of the Special Committee, including meetings with stakeholders, regulators, and prospective purchasers. (See Conf. Hr’g Tr. Mar. 19, 2014 (Rogers) at 19:18-20:20.)
. As described more fully in the Adversary Proceeding Decision, on May 15, 2013, Mr. Ergen, through his wholly-owned entity LBAC, submitted an unsolicited bid for LightSquared LP's spectrum assets for $2 billion. On July 22, 2013, DISH purchased LBAC for a dollar, and, the next day, DISH announced its intention to bid through LBAC for LightSquared LP's spectrum assets for $2.22 billion (the “DISH/LBAC Bid”). On that date, DISH also executed a Plan Support Agreement with the Ad Hoc Secured Group, pursuant to which LBAC would act as the stalking horse bidder for the Ad Hoc Secured Group's plan. A joint chapter 11 plan of reorganization proposed by the Ad Hoc Se
. Conf. Hr'g Tr. Mar. 27, 2014 (Zelin) at 21:13-23:1 ("My reaction was that a bidder in a process demanding that information that they uncover that they think are issues that other bidders should know is quite strange. I've never experienced that before.”) The Debtors and the Special Committee canceled the December 11, 2013 Court-scheduled auction for LightSquared's assets (or any grouping or subset thereof), and they did not deem any bid the “Successful Bid.” See Specific Disclosure Statement at 3. On January 7, 2014, LBAC, through its counsel, sent the Ad Hoc Secured Group written notice of LBAC’s termination of the Plan Support Agreement and subsequently informed the Ad Hoc Secured Group of the termination of the DISH/ LBAC Bid. See id. at 4. On January 13, 2014, the Ad Hoc Secured Group filed the Statement of the Ad Hoc Secured Group of LightSquared LP Lenders and Notice of Intent To Proceed with Confirmation of the First Amended Joint Chapter 11 Plan for LightSquared LP, ATC Technologies, LLC, LightSquared Corp., LightSquared Inc. of Virginia, LightSquared Subsidiary LLC, LightSquared Finance Co., LightSquared Network LLC, LightSquared Bermuda Ltd., SkyTerra Holdings (Canada) Inc., and SkyTerra (Canada) Inc., Proposed by the Ad Hoc Secured Group of LightSquared LP Lenders [Docket No. 1220], in which the Ad Hoc Secured Group challenged LBAC's termination of the DISH/LBAC Bid (the "Ad Hoc Secured Group Motion to Enforce”). LBAC then sought a declaratory judgment "declaring that both the PSA and LBAC Bid were terminated in their entirety on or before January 10, 2014.” See Objection of L-Band Acquisition, LLC to the January IS, 2014 Statement of the Ad Hoc Secured Group of LightSq-uared LP Lenders and Notice of Intent To Proceed with Confirmation of the First Amended Joint Chapter 11 Plan and Motion for Declaratory Relief, dated January 16, 2014 [Docket No. 1232] at 18; Reply in Further Support of Objection of L-Band Acquisition, LLC to the January 13, 2014 Statement of the Ad Hoc Secured Group of LightSquared LP Lenders and Notice of Intent To Proceed with Confirmation of the First Amended Joint Chapter 11 Plan and Motion for Declaratory Relief, dated January 21, 2014 [Docket No. 1246]. On January 22, 2014, this Court issued a ruling that the Plan Support Agreement and the DISH/LBAC Bid were lawfully terminated by LBAC. See Jan. 22, 2014 Hr'g Tr. [Docket No. 1278],
. See fall, supra. Between April 13, 2012 and April 26, 2013, SPSO contracted to purchase over $1 billion in face amount of LP Debt, of which it actually closed trades for $844,323,097.83, which is the current face amount of the SPSO Claim, excluding interest.
. Mr. Ergen’s presentation (the “Ergen Valuation”), was entitled “Strategic Investment Opportunity — L-Band Acquisition, LLC.” (PX1047.) It was delivered to the DISH Board of Directors by Mr. Ergen at a special meeting on July 8, 2013. Under a line item entitled "Implied Net Primary Asset Value,” the Ergen Valuation listed a range of values of between $3,341 billion and $5,213 billion, with a mid-point of $4,277 billion, referring to Mr. Ergen's estimate of the value of 20 MHz of LightSquared's spectrum assets and its satellites, excluding its 10MHz of Lower Downlink. Under the heading "Implied Supplemental Asset Value,” the Ergen Valuation listed a range of values of between $1,833 billion and $3,783 billion, with a mid-point of $2,308 billion, for what it identifies as the total of (i) 5.0 MHz of "Reclaimed Unuseable [sic ] AWS-4,” (ii) 5.0 MHz of “Reclaimed Impaired AWS-4,” and (iii) "L-Band Down-link Spectrum.” The Implied Supplemental Asset Value was Mr. Ergen’s estimate of (a) the increase in value of DISH’s existing spectrum that would flow from DISH’s acquisition of LightSquared’s spectrum, which would permit unusable and impaired uplink AWS-4 spectrum owned by DISH to be converted to downlink and (b) his range of values for 20 MHz of LightSquared’s downlink spectrum. In other words, the supplemental value of LightSquared’s assets to DISH was estimated by Mr. Ergen to be between $1,833 billion and $3,783 billion. Combined with the Implied Net Primary Asset Value of $3,341 billion to $5,213 billion, the total value of LightSquared's assets in DISH’s hands was estimated by Mr. Ergen to be between $5,174 billion and $8,996 billion, with a midpoint of $7,085 billion.
. PWP served as financial advisor to the Special Committee of the DISH Board of Directors that was created on May 8, 2013 to evaluate and make recommendations to the DISH Board regarding a possible bid by DISH for LightSquared’s assets and to review any potential conflicts of interest arising from Mr. Ergen's purchases of LightSquared debt.
. Because the Second Amended Plan was conditioned on FCC approval of the License Modification Application, and there was uncertainty about the timing of such approval, the parties determined to develop a different plan that was not conditioned on FCC approval. (See Conf. Hr'g Tr. Mar. 20, 2014 (Smith) at 17:16-18:15; Conf. Hr'g Tr. Mar. 28, 2014 (Jaffrey) at 41:17-42:7.)
. Mr. Falcone also added that, under the Plan, Harbinger could pay “a couple of hundred” million for a call option which would enable Harbinger to increase its stake in the reorganized company from thirty-six percent to forty-five percent. (Conf. Hr’g Tr. Mar. 31, 2014 (Falcone) 103:4-13.) He testified that the preferred and common stock that Harbinger would receive under the Plan would rank junior to the SPSO Note. (Id. at 102:8-12.)
. The Special Committee asserts that it adopted terms that were not beneficial to the Plan Support Parties, and actually contrary to "conditions precedent” initially proposed by the Plan Support Parties. For instance, the Special Committee rejected Harbinger’s request for board representation in the New LightSquared Entities (see Conf. Hr’g Tr. Mar. 19, 2014 (Rogers) at 107:1-5), and Harbinger contributed to the estate its litigation claims against Mr. Ergen, the GPS industry, and the FCC. (Id. at 105:2-106:7.)
. Mr. Hootnick testified that both assumptions as to FCC approval are "outside dates,” explaining that LightSquared, Mr. McDowell, and Moelis have utilized the "conservative view,” while some expect the License Modification Application to be granted sooner. (Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 12:14-22; 22:14-23:13.)
. To perform its valuation of LightSquared's Lower Uplink and Upper Uplink (together, the "Uplinks”) and the New Downlink, Moelis relied on discussions with Mr. Smith and Jeffrey Carlisle, LightSquared’s Executive Vice President for Regulatory Affairs and Public Policy, and the opinion of Mr. McDowell, that, by the end of 2015, the FCC would have granted the License Modification Application, which includes the use of the Uplinks and the swap with the NOAA Spectrum to make a ten-by-twenty block of spectrum. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 10:15-13:6, 24:21-25:3.) Messrs. Smith and Carlisle were the "two main parties interacting with the FCC.” (Conf. Hr’g Tr. Mar. 24, 2014 (Ho-otnick) at 11:23-12:7.)
.Conf. Hr'g Tr. Mar. 24, 2014 (Hootnick) at 22:19-22 ("We came up with a market comp range of sixty cents to ninety cents a megahertz POP for use in our valuation. We then made some additional — or adjustments based on the assumptions we talked about earlier.”); see also id. at 29:2-14; Moelis Valuation Re
. See PX1047, PX1048; Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) at 32:5-37:16.
. See Conf. Hr'g Tr. Mar. 26, 2014 (Ergen) 73:3-15.
. On March 4, 2014, when Mr. Reynertson submitted GLC’s valuation report (PX1002 and SPX158, the “GLC Valuation Report”), he had had only three weeks of experience with spectrum and satellite valuation generally — those being the three weeks beginning with his retention by SPSO and concluding with delivery of the GLC Valuation Report. (See Conf. Hr'g Tr. Mar. 27, 2014 (Reynert-son) at 199:20-200:6.)
.Conf. Hr'g Tr. Mar. 27, 2014 at 135:10-15 (Mr. Cohen: “They would like this witness to offer valuation testimony when he just told you he didn’t do a valuation on the assets of the company, which are the spectrum and the satellites. We don’t think ... it meets the standards under [Federal Rule of Evidence] 702.”); 137:1-140:21 (Mr. Cohen: “And with respect to those issues, I think he ... acquired them for purposes of this case in the last five weeks. I don't think that makes him an expert.”).
. Mr. Reynertson, using his own judgment, made reductions to the value of LightSq-uared’s spectrum based on the "risk” associated with achieving regulatory approval. (See Conf. Hr’g Tr. Mar. 27, 2014 (Reynertson) at 164:19-24 (noting that page 12 of GLC Valuation Report reflects "the sum of the proposed 2021 numbers the debtors hope to achieve, and then a reduction for the risks that we saw, the range of risks that we saw in each of the blocks”).) Mr. Reynertson, however, could not assess those risks himself and did not have anyone upon whom he could rely to do so. He also drew his own conclusions as to which interference issues are insurmountable or, alternatively, would cause reductions in the value of the spectrum. (See id. at 164:19-24.) For example, he deducted from the value of LightSquared’s spectrum the costs of relocating NOAA from its current spectrum block as a result of the granting of the License Modification Application. (See Conf. Hr’g Tr. Mar. 24, 2014 (Hootnick) 38:2-42:14 (discussing inaccuracies in the GLC Valuation Report).) In addition, Mr. Reynert-son improperly discounted twice for the same purported "defect” in the uplink spectrum: the "guard bands” he created in the Uplinks are intended to "cure” the purported interference issues, yet he valued the remaining 5 MHz of spectrum in each uplink band as if the interference “problem” had not been resolved, and FCC approval had not been obtained.
. The first time Mr. Reynertson saw the PWP Valuation and the Ergen Valuation was at his deposition on March 5, 2014, the day after he completed the GLC Valuation Report. (Conf. Hr’g Tr. Mar. 27, 2014 (Reynertson) 144:24-146:1.) Mr. Reynertson acknowledged that reviewing these reports would have been “informative” and would "have helped [him] understand how other sophisticated investors have looked at this spectrum." (Id. at 249:24-250:5.)
. See fn 19, supra-, Appendix A (filed under seal).
. In addition to a creditor being a competitor, other justifications for separate classification cited to the Court by the Debtors include (i) ulterior motives demonstrated by the creditor's conduct during a debtor’s case and (ii) necessity. LightSquared’s Post-Trial Memorandum of Law in Further Support of (I) Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code, (II) Motion To Designate Vote of SP Special Opportunities, LLC, and (III) Motion Seeking Approval of New DIP Facility [Docket No. 1486] at 78, 82-86.
. LightSquared's (A) Memorandum of Law in Support of Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code and (B) Omnibus Response to Objections to (i) Confirmation of Plan, (ii) Motion To Designate Vote of SP Special Opportunities, LLC, and (iii) Motion Seeking Approval of New DIP Facility [Docket No. 1413] at 19 n.24.
. Objection of SPSO to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1408] at 7 n.5.
. See 500 Fifth Ave. Assocs., 148 B.R. at 1019-20 (citing 5 L. King, Collier on Bankruptcy pp. 1122.03[l]-[b](15th ed. 1992)).
. This Court has previously found that "one could reasonably expect a competitor to vote differently than a non-competitor lender on material matters concerning LightSquared, and, more significantly, a competitor given access to material non-public information about LightSquared may use it to LightSq-uared’s detriment, given that a competitor may possess a desire to see LightSquared fail." Adversary Proceeding Decision at 128.
. Conf. Hr’g Tr. Mar. 27, 2014 (Zelin) at 17:13-18:7 (explaining how DISH and LightSquared were competitors prior to the commencement of the Chapter 11 Cases: "It’s clear what DISH’s business plan was having experienced it and read about it in
. DISH was seeking, among other things, to acquire spectrum in competition with LightSquared, to develop handsets in competition with LightSquared, and to take control of Sprint, with which LightSquared had hoped to join in building its network. (See Conf. Hr’g Tr. Mar. 27, 2014 (Zelin) at 15:18— 18:7; Conf. Hr’g Tr. Mar. 20, 2014 (Smith) at 26:21-29:10 (explaining circumstances of LightSquared’s relationship with Sprint and the difficulties that SPSO could have caused if it had been a lender at the time LightSquared first negotiated and entered into its agreement with Sprint and could cause in the future for negotiation of similar contractual arrangements).)
. In fact, as early as the spring of 2013, Mr. Zelin suggested placing SPSO in a separate plan class because, despite not knowing with certainty the identity of SPSO, the parties suspected it was a competitor. (Conf. Hr'g Tr. Mar. 27, 2014 (Zelin) 17:13-18:7 (explaining basis for Ad Hoc Secured Group separately classifying SPSO’s claims in restructuring proposal in May 2013 to LightSquared: "I think in our judgment and the judgment of our clients, Ergen, whether he was SPSO, whether he was LBAC, the initials didn't make a difference to me, Ergen was Ergen. He was a competitor, somebody who would have competing interests”).)
. During the day of the auction scheduled for December 11, 2013, LBAC’s and SPSO's counsel told Mr. Zelin that she hoped that someone else showed up or it would be bad for his clients. (Conf. Hr’g Tr. Mar. 27, 2014 (Zelin) at 37:25-39:3.) Later that same day, after the auction was cancelled by the Special Committee, counsel told the Ad Hoc Secured Group that LBAC was not prepared to close on the terms that they had negotiated. (Id. at 39:4-21.)
. Mr. Ergen testified that he did not even talk to SPSO's counsel about the specific performance on behalf of SPSO because he alone viewed the claim as frivolous. (See Conf. Hr’g Tr. Mar. 26, 2014 (Ergen) at 133:24-142:3.)
. See Objection of SPSO to Confirmation of Debtors' Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1408] ¶ 13, n.4.
. Mr. Ergen attempted to disclaim that DISH and LightSquared were competitors. Mr. Ergen testified that (a) LightSquared did not have a network today that could compete with a DISH network of the future and (b) LightSquared did not have the financial wherewithal to bid on other available spectrum and thus did not compete with DISH. (See Conf. Hr’g Tr. Mar. 26, 2014 (Ergen) at 279:2-282:12.) Mr. Ergen later admitted that both DISH and LightSquared today would compete in the marketplace as sellers of spectrum or as potential partners for other network owners. (See id. at 328:15-330:2.)
.Mr. Ergen's January 13, 2014 testimony was given in the Adversary Proceeding trial.
. DISH Form 10-K at F-18 (Feb. 21, 2014); Jan. 13, 2014 Hr'g Tr. (Ergen) 95:6-96:4; 101:5-103:5; 105:11-108:10; Mar. 26, 2014 Conf. Hr’g Tr. (Ergen) 328:15-329:15.
. See Conf. Hr’g Tr. Mar. 20, 2014 (Smith) at 21:13-25 ("The primary reason [for separately classifying SPSO’s claims] is that SPSO is a competitor of LightSquared.... [A]s a competitor, and we absolutely view them as a competitor here in that their interests are not those typically of a financial investor, meaning that their actions and behaviors are driven by different motivations.”); 28:7-29:10 ("Part of the classification certainly has to do with the competitor status, as I said. And I’d like to illustrate a point. So there are certain rights that our first and second lien holders have. It's [sic] right to information, it’s [sic] approval rights. So, for example, under the current LP debt documents, back when we were building our network in 2011, we signed an agreement with Sprint. That was an agreement that needed lender approval. So we had to make them aware of exactly what we were doing before we had signed a document. We had to seek their approval so we got certain waivers so that we could actually enter into that agreement. That’s a situation and an example that I would not want a competitor to know what we were doing before we did it. In that case specifically, I understand through press reports and other statements that DISH was also trying to seek a similar agreement with Sprint in and around the same time for a network sharing agreement. And that’s something where we can’t be effective as a company if that type of information is given to a competitor and they can see the terms of the agreement, they can see exactly what we’re doing, and they still have time to go in and try and take it from us. So part of this is governance as well, which is we need to control the information, and part of the position and the treatment that SPSO receives does limit what we have to share with them and it's really focused on the competitive nature of what we're doing.”).
.Post Confirmation Trial Brief of SP Special Opportunities, LLC and Objection to Confinnation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1517] at 42-43.
. See Vote Designation Motion at ¶¶ 69-85; Vote Designation Joinder at ¶¶ 10, 14, 16-17; Corrected Post-Trial Confirmation Brief of the Ad Hoc Secured Group of LightSquared LP Lenders [Docket No. 1494] at 70.
. Mr. Falcone offered to move Fortress' and the other LP preferred holders' claims ahead of the SPSO Claim. (SPX069 ("Then move it ahead of charlie.”); SPX071 ("What if we move the LP pref ahead of Charlie?”); SPX070 ("We are working on elevating the pref ahead of Charlie. Will that help?”).)
. See Adversary Proceeding Decision FOF ¶¶ 63, 89.
. It is unclear exactly what the Second Circuit intended by the words “pre-existing”— i.e., pre-petition or pre-plan proposal.
. Post Confirmation Trial Brief of SP Special Opportunities, LLC and Objection to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1517] at ¶ 185.
. Post Confirmation Trial Brief of SP Special Opportunities, LLC and Objection to Confirmation of Debtors' Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1517] at ¶ 158.
. LightSquared's (A) Memorandum of Law in Support of Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankmptcy Code and (B) Omnibus Response to Objections to (i) Confirmation of Plan, (ii) Motion To Designate Vote ofSP Special Opportunities, LLC, and (iii) Motion Seeking Approval of New DIP Facility [Docket No. 1413] at ¶ 175.
. Because the SPSO Claim will not be subordinated in its entirety, it must be considered a secured claim for purposes of the cram-down analysis.
. See Notice of Filing of Clean and Blackline Versions of (A) Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankmptcy Code, (B) Debtors’ Third Amended Specific Disclosure Statement and (C) Revised Form of Final DIP Order [Docket No. 1336] at Exhibit B (Projections); Mar. 24, 2014 Conf. Hr'g Tr. (Hootnick) 25:4-27:7; 52:19-24; 54:12-20; 62:2-6; 66:7-11; 112:11-113:2; see also Mar. 20, 2014 Conf. Hr’g Tr. (Smith) 45:10-47:6; 48:4-50:23; Mar. 6, 2014 Dep. Tr. (Montag-ner) 10:17-14:5; 38:4-39:18; 67:25-68:5.
. See Plan at I.A.303 ("the liens securing the SPSO Note shall be silent, third priority liens limited to the assets of NewCo and each of its subsidiaries ...”).
. At closing argument, counsel for the Special Committee also highlighted for the Court the increased value of the Debtors’ assets under the Plan due to the fact that the Plan integrates the estates of LightSquared LP and LightSquared Inc. and thus creates increased value through (i) synergies between the two estates and (ii) the preservation of a valuable net operating loss. (May 5, 2014 Conf. Hr’g Tr. at 28:24-30:7.)
. LightSquared’s Post-Trial Memorandum of Law in Further Support of (I) Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code, (II) Motion To Designate Vote of SP Special Opportunities, LLC, and (III) Motion Seeking Approval of New DIP Facility [Docket No. 1486] at 23.
. The Moelis Valuation Report was not the first valuation performed by Moelis with respect to LightSquared. Moelis has performed valuations of the Debtors' assets on several previous occasions, including in connection with proposed DIP financing; none of these reflects a valuation as high as that reflected in the Moelis Valuation Report.
. As a consequence of the Court’s overall ruling on valuation, there is no need to quantify the effect, if any, on the value of LightSq-uared’s spectrum assets due to the "technical issue.”
. Jan. 16, 2014 Hr'g Tr. (Falcone) 15:17-16:1. Mr. Falcone’s January 16, 2014 testimony was given in the Adversary Proceeding trial.
.Post Confirmation Trial Brief of SP Special Opportunities, LLC and Objection to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1517], Attachment B.
. The Court does not reach the second prong of the indubitable equivalent analysis — appropriateness of the interest rate of the note— and makes no findings with respect to the appropriateness of the proposed rate of interest of the SPSO Note, which is LIBOR (with a floor of 1.00%) plus 12.00%. (Plan at § I.A. 300).
. LightSquared’s Reply in Support of Its Post-Trial Memorandum of Law in Further Support of (I) Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of Bankruptcy Code, (II) Motion To Designate Vote of SP Special Opportunities, LLC, and (III) Motion Seeking Approval of New DIP Facility [Docket No. 1525] at Ex. A, p. 21.
. Objection of SPSO to Confirmation of Debtors’ Third Amended Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 1408] at ¶ 72.
.See, e.g., In re Central European Distribution Corporation, et al., Case No. 13-10738(CSS) (Bankr.D. Del. March 13, 2013), Findings of Fact and Conclusions of Law (I) Approving (A) The Disclosure Statement, (B) The Prepetition Solicitation Procedures, and (C) Forms of Ballots, and (II) Confirming the Second Amended and Restated Joint Prepackaged Chapter 11 Pan of Reorganization of Central European Distribution Corporation, et al„ dated March 13, 2013 [Docket No. 166] (confirming plan employing a reverse Dutch auction procedure in which noteholders could elect to bid for cash treatment).
. See Corrected Post-Trial Confirmation Brief of the Ad Hoc Secured Group of LightSquared LP Lenders [Docket No. 1494] at 2-3, 32-33, 36-38.
. Adv. Pro. Ex. PX0867.
. Evidence was presented at the Confirmation Hearing that DISH's engineers have been told by different vendors, including Huawei and Avago, that the “technical issue” is not an impediment to use of LightSquared's Uplinks. One email from Huawei acknowledged Mr. Ergen’s intent to use the "technical issue” as a device to “lower” the acquisition price for LightSquared's spectrum. (PX1026) (Huawei employee stating that "technically, we are optimistic to make L-band ... work for DISH but understand it might involve more than technical for Charlie to make decision now, and wise to leave the door open and drive the price down in the future.”).
. Mr. Ergen flew to New York to attend the auction with a team of DISH personnel, including Stanton Dodge (DISH General Counsel), Tom Cullen (DISH Executive Vice President, Corporate Development), George Brokaw (DISH Independent Director), Carl Vogel (DISH Director), and at least two members of DISH’s technical team. (See Conf. Hr'g Tr. Mar. 26, 2014 (Ergen) at 81:16-83:7; 230:18-231:13.) Mr. Ergen also had a quorum of DISH’s Board ready to be on standby during the auction. (Conf. Hr'g Tr. Mar. 26, 2014 (Ergen) at 82:18-83:7.)
. See fn 52, supra.
. Before the auction, Mr. Ergen consulted with the DISH Board with respect to the auction and put the DISH board on notice to act immediately. The Board granted a waiver of the typical forty-eight hour requirement for board meetings until January 9, 2014, which was the day that the trial in the Adversary Proceeding was scheduled to begin. (Conf. Hr’g Tr. Mar. 26, 2014 (Ergen) at 256:25-257:6; 286:7-287:5; SPX028.)
. Section 6.1(f)(1) of the Plan Support Agreement permitted LBAC to terminate on three business days’ written notice in the event that one or more of the milestones set forth on Exhibit C to the Plan Support Agreement were not satisfied. See Plan Support Agreement [Docket No. 765] at Ex. A, § 6.1(f)(1).
. See Jan. 22, 2014 Hr’g Tr. [Docket No. 1278],
. Id. at 109:23-110:9; Order (A) Establishing Bid Procedures, (B) Scheduling Date and Time for Auction, (C) Approving Assumption and Assignment Procedures, (D) Approving Form of Notice and (E) Granting Related Relief, dated October 1, 2013 [Docket No. 892].
. Mar. 26, 2014 Conf. Hr’g Tr. (Ergen) at 93:25-102:6.
. See Memorandum Decision Granting Motions to Dismiss Complaint [Adv. Docket No. 68], 504 B.R. 321, 339 (Bankr.S.D.N.Y. 2013).
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