DBSD, Creditors Spar In Court Over Proposed $1.1 Billion Dish Buyout
07 Febbraio 2011 - 8:30PM
Dow Jones News
DBSD North America Inc. and its creditors sparred in court
Monday in what amounted to an undercard to next week's main event
over whether the satellite company should exit bankruptcy via a
debt-for-equity swap or a $1.1 billion sale to Dish Network Corp.
(DISH) announced by DBSD last week.
Judge Robert E. Gerber of U.S. Bankruptcy Court in Manhattan
said he had concerns about the Dish sale proposal, specifically a
provision in the agreement that could hinder other possible buyers
from successfully bidding on the company. Gerber added that a
lawyer for an ad-hoc group of DBSD bondholders might have a valid
point when he said the Dish deal is nothing more than an "option to
buy," rather than a sale agreement.
Dish last week agreed to buy DBSD, which has been mired in
bankruptcy after its original exit plan was overturned on appeal
last December. The deal includes a $25 million break-up fee as well
as a $25 million reverse break-up fee, depending on which party
walks away from the proposed deal.
A lawyer for DBSD said terms of the deal have already been
improved since it was announced and stressed that the company's
modified bankruptcy exit plan is also still on the table.
The Dish deal, which also includes interest accruing on DBSD's
debt, needs approval from the Federal Communications Commission and
is subject to DBSD's emergence from bankruptcy.
Dish said it will provide a debtor-in-possession credit facility
to DBSD that will consist of a nonrevolving, multiple draw term
loan of $87.5 million. A hearing on the agreement in front of
Gerber of the U.S. Bankruptcy Court in Manhattan has been set for
Feb. 15. A lawyer for Dish, J. Eric Ivester of Skadden Arps Slate
Meagher & Flom LLP, said the loan proves that Dish is serious
about the bid.
"It's not an option, your honor. We are real. We have the
capital to close this transaction," Ivester said. He added the
company would "huddle with the debtors" over whether to eschew the
"no-shop" provision.
Dish is controlled by satellite-television mogul Charles Ergen,
who is also seeking to use his other publicly traded company,
EchoStar Corp. (SATS), to bring TerreStar Networks Inc. out of
bankruptcy.
Under the Dish buyout plan, Dish would get 100% of reorganized
DBSD's equity, pay DBSD's senior notes in full, and provide what
DBSD calls enhanced recovery for its unsecured creditors.
Reston, Va.-based DBSD, a unit of ICO Global Communications
Holdings Ltd. (ICOG), is developing a system that combines both
satellite and terrestrial communications capabilities for wireless
voice, data and Internet services.
In 2009, Gerber confirmed DBSD's plan to exit bankruptcy, which
would have called for bondholders to swap $740 million in debt for
a 95% stake in the reorganized company. Dish, the sole holder of
$40 million in first-lien loans, would have had its debt continued
with the new company under amended terms.
Besides the ad-hoc bondholders, major creditor Sprint Nextel
Corp. (S) is also objecting to the Dish plan.
Both Dish Network and Sprint objected to the plan's
confirmation, and they got their wish in late 2010 when the Second
U.S. Circuit Court of Appeals overturned it. Dish had called the
plan unfeasible, and Sprint objected to the way the plan placed it
lower on the totem pole than other creditors.
On Monday, the three-judge appellate panel issued a 62-page
written ruling, explaining why it upheld the Sprint objection,
ruling 2-to-1 in Sprint's favor, while unanimously rejecting
Dish's.
The ad-hoc group of bondholders said in court that the modified
version of the plan, which addresses the concerns issued by the
appellate judge, could get DBSD out of bankruptcy by the end of the
month.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Joseph Checkler, Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com
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