The Continuing Evolution of the Basis for Equitable Subordination

The court's opinion explained that SPSO, under the control of Charles Ergen, the founder, Board chair and controlling shareholder of Dish Network, had acquired $844 million of senior secured debt of LightSquared LP. 511 B.R. at 279, ”88, 89. Two hundred eighty seven million dollars of the face amount of the debt purchases occurred prior to the filing of the LightSquared bankruptcy cases on May 14, 2012, for a purchase price of $172 million. Id. at 274, '63. The purchases were made at a time when there were restrictions on the holders of LightSquared secured debt to preclude its competitors from holding that debt, and SPSO was aware of, and was created to, navigate those restrictions. Id. at 345-346.

There are a series of other decisions in the LightSquared case, including one issued on July 11, 2014, that denied confirmation of a plan, and addressed designation of votes under Section 1126(e); classification; unfair discrimination; fair and equitable standards; and indubitable equivalence. The discussion of the applicable law in these decisions is extensive and thorough. Because of their length and depth, dissecting these decisions in this article is not possible. For the same reasons, this article does not address subsequently reported developments such as resignations by certain members of the Board of LightSquared, filing of lawsuits, apparent settlements, and submission of competing plans.