DTH broadcaster DISH Network has entered into an agreement to acquire MSS operator DBSD North America, formerly ICO North America, for approximately US$1bn following the latter’s exit from Chapter 11 bankruptcy protection.
The proposal, which would also…
DTH broadcaster DISH Network has entered into an agreement to acquire MSS operator DBSD North America, formerly ICO North America, for approximately US$1bn following the latter’s exit from Chapter 11 bankruptcy protection.
The proposal, which would also see DISH provide DBSD with an US$87.5m debtor-in-possession multiple-draw credit facility, remains subject to approval by the Bankruptcy Court with a hearing scheduled for 15 February.
Under the terms of DISH’s investment agreement, holders of the 7.5% convertible senior secured notes, due 2009, will have all their claims paid in full, while DBSD’s previous DIP financing and exit facility will also be fully repaid. There is approximately US$750m of the senior notes outstanding with DISH understood to hold around 15% of that.
As for DBSD’s general unsecured creditors, of which mobile operator Sprint Nextel is the largest, they will receive partial payment of their claims, while certain additional bankruptcy claimants are to be paid in full.
The announcement comes as somewhat of a surprise given that on the same day that DISH revealed its plan, 1 February 2011, the Ad Hoc Committee representing the majority of DBSD senior noteholders were to participate in the syndication of a new US$100m exit facility that would be used to fund DBSD’s emergence from bankruptcy protection under the court approved reorganisation plan.
DISH has previously challenged that reorganisation agreement, under which the senior noteholders would swap their debt for 95% of the equity in the newly emerged DBSD, having argued that the first lien secured debt holders should receive more equity rather than the planned PIK notes. DISH holds the entirety of the US$51m first lien debt having snapped it up at a discount from the pre-petition lenders in July 2009 in what was widely regarded as a ‘loan-to-own’ strategy.
However, DISH’s claims were rejected by the US Court of Appeals Second Circuit in December 2010 prompting the company to find an alternative route to take control of DBS North America.
Neither DBSD nor the Ad Hoc Committee of noteholders would comment on the modified credit facility or the DISH bid.
DBSD is being advised on the restructuring process by Jefferies & Company, Kirkland and Ellis and Davis Wright Tremaine.
UBS Securities and Milbank, Tweed, Hadley & McCloy are advising the principal noteholders. Linklaters and K&L Gates are advising DISH Network and Sprint respectively, while Curtis, Mallet-Prevost, Colt & Mosle are acting as attorneys for a committee of unsecured creditors.
The great spectrum race
The logic behind DISH’s sizeable bid for DBSD centres on the perceived value of the spectrum that the latter controls through its ATC-MSS licence.
As with hedge fund Harbinger Capital Partners’ multi-billion dollar investment in its LightSquared venture, DISH and its sister company EchoStar are seeking to amass a significant pile of North American spectrum through the acquisition of ATC licence holding satellite operators in the expectation that the assigned spectrum will become increasingly valuable given the exponential rise in demand for wireless broadband capacity.
It is not clear if DISH and EchoStar are seeking to follow LightSquared’s plan of building a hybrid satellite-terrestrial LTE network across the United States and then wholesaling capacity on it but if the two companies are successful in their takeover attempts then they will control a 40MHz block of 2GHz MSS spectrum that could be offered to potential wireless operators in the US. Last week’s decision by the FCC to waive certain rules governing LightSquared’s ATC licence, thus enabling the group’s wholesalers to offer terrestrial-only services, serves only to enhance any such plan.
Interestingly, EchoStar’s strategy to takeover the bankrupt Terrestar is markedly different to DISH’s manoeuvrings for DBSD. While DISH sort to challenge the pre-pack plan of reorganisation following its acquisition of the first lien debt, EchoStar has been central to the Terrestar restructuring plan. Indeed, it is Harbinger that has been snapping up a portion of the debt post-Chapter 11 filing in order to block the EchoStar-led plan.
