DBSD Noteholders Object To Dish Networks-Led Buyout of DBSD
February 03 2011 - 2:50PM
Dow Jones News
Investors in DBSD North America Inc. are objecting to the
company's proposed sale to Charlie Ergen's Dish Networks Corp.
(DISH), calling it highly risky and expensive. They say DBSD should
move forward with its previously proposed plan, which would allow
the company to exit bankruptcy within a month.
In a filing Tuesday with the U.S. Bankruptcy Court in Manhattan,
an ad-hoc committee of DBSD's senior secured convertible
bondholders said that in announcing the $1 billion proposed sale of
the company to Dish earlier this week, DBSD "failed to disclose to
the court a crucial fact" that a settlement on the existing plan
was reached between all parties other than Dish that would've led
to a speedy exit from bankruptcy.
"The DISH sale process--if allowed to proceed in place of
approval and consummation of the amended modified plan--assures
only one thing: the continued languishing of the debtors in
bankruptcy," the ad-hoc committee says in its court filing. The
noteholders also say that the Dish deal has too many contingencies,
and that many creditors would get worse recoveries than under the
modified existing plan.
A spokesman for ICO Global Communications Holdings Ltd. (ICOG),
DBSD's parent company, declined to comment.
Dish earlier this week agreed to buy DBSD, which has been mired
in bankruptcy after its original exit plan was overturned on appeal
last December.
The 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 non-revolving, multiple draw term
loan of $87.5 million. A hearing on the agreement in front of Judge
Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan has been
set for Feb. 15.
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.
"Indeed, the alternate plan values the debtors at more than 150%
of the valuation provided under the debtors' currently pending
Chapter 11 plan," DBSD says in a court filing made Tuesday.
"The alternate plan further represents an opportunity for the
Debtors to partner with an established participant in the satellite
telecommunications space with the resources to fund the debtors'
business plan and ensure postemergence viability going
forward."
Reston, Va.-based DBSD 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.
Both Dish Network and Sprint Nextel Corp. (S) objected to the
confirmation, and they got their wish in late 2010 when a court
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.
(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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