US Bankruptcy Court Judge Robert Gerber has approved the amended and restated investment agreement between DBSD North America and Dish Network. The decision means that Dish will now push ahead with its plan to acquire 100% of the equity of the…
US Bankruptcy Court Judge Robert Gerber has approved the amended and restated investment agreement between DBSD North America and Dish Network. The decision means that Dish will now push ahead with its plan to acquire 100% of the equity of the reorganised DBSD for approximately US$1.4bn.
Under the terms of the amended investment agreement, DISH will receive 10,000 shares in the reorganised company in return for satisfying in full all of the claims of the holders of the 7.5% Convertible Senior Secured Notes due 2009, 100% of the general unsecured claims, including approximately US$40m to settle the claims of Sprint Nextel, and 100% any allowed administrative claim. Holders of DBSD capital stock, including ICO Global, will be paid an aggregate of US$290m.
In addition, Dish will fully repay the existing debtor-in-possession credit facility and then provide a new US$87.5m multiple-draw DIP facility.
In a statement supporting the revised investment agreement, ICO stated: “The last forty-five days have seen extraordinary developments in the debtors’ cases. These developments have resulted in Dish submitting an amended investment agreement in which all creditors are unimpaired and will be paid the full amount of their allowed claims and equity will receive a substantial distribution.
“This substantially increased distribution to all stakeholders is due to an active and competitive bidding process that has taken place over the last several weeks. Accordingly, ICO Global is now convinced that the current version of the investment agreement represents the highest and best value available to the estate.” The bankruptcy court’s approval also triggered both the restructuring support agreement and implementation agreement that ICO and Dish signed on 15 March. The former requires ICO to support the plan of reorganisation and take certain actions to facilitate the consummation of this plan, including opposing any alternative transaction.
The implementation agreement sees ICO receive approximately US$325m in return for certain assets and spectrum rights. The payment is split between US$35m that is payable within five days of bankruptcy court approval of the implementation agreement, US$279.5m payable when Dish repurchases greater than 50% of the 7.5% Convertible Senior Secured Notes, and US$10m when DBSD emerges from bankruptcy protection. However, the total amount received by ICO will be subtracted from its portion of the US$290m equity distribution outlined in the restated investment agreement.
In exchange, ICO has agreed to sell to Dish its priority spectrum rights vis-à-vis DBSD’s G1 satellite; provide Dish with a contingent call right on ICO’s equity interest in DBSD, exercisable in certain circumstances; pay over to Dish any distributions that ICO receives pursuant to any alternative restructuring plan proposed by a party other than Dish, less an amount equivalent to what ICO would receive in the implementation agreement; and grant Dish an option to purchase certain international assets owned by ICO, including its medium earth orbit (MEO) satellites and trademarks.
The last condition is only applicable if the existing option to acquire ICO’s MEO assets held by Jay and Jayendra is not taken up. Indeed, ICO stated that the implementation agreement does not alter its obligations to J&J, nor does it affect the ongoing lawsuit with Boeing.
ICO added that it believes that substantially all of the income resulting from implementation agreement will be offset by the company’s net operating loss carryforwards, resulting in little if any income tax liability.
Hedge funds’ Terrestar bid remains despite DBSD decision
Judge Gerber’s decision thwarts the counter offer that was jointly made by mobile operator MetroPCS and hedge funds Harbinger Capital Partners and Solus Alternative Asset Management.
Both parties had originally made separate bids with MetroPCS filing a tentative bid on 10 March that was conditioned upon the completion of additional due diligence and securing sufficient financing.
The hedge funds were slightly more certain with their offer, submitting a non-binding term sheet that proposes new plans of reorganisation and debtor-in-possession financings for both DBSD and Terrestar.
While the DBSD offer was scuppered by Dish’s revised bid, the move for Terrestar is still in process. Under the terms of that deal, the hedge funds propose a new US$123.9m DIP facility that would replace the existing facility that was provided by EchoStar, as well as fund bankruptcy related costs and provide working capital. All holders of the US$944m outstanding of the 15% senior secured PIK notes, of which EchoStar owns more than half, would be afforded the opportunity to participate in the new DIP facility.
The reorganisation plan then stipulates that the 15% notes held by EchoStar would be paid in full while the remaining noteholders offered a full cash settlement or equivalent equity stake based on a pro forma estimated enterprise value.
The TSN 6.5% senior exchangeable notes would be treated in the same way with EchoStar being paid in full and the remaining creditors receiving equity in the reorganised company. As for the existing shareholders, any value remaining after payment of all claims would be allocated to them based on the estimated enterprise value.
The hedge funds have also opened the door for the potential acquisition of Terrestar Corporation at an agreed enterprise value.
Quinn Emanuel Urquhart & Sullivan is counsel to Solus while DBSD is being advised by Jefferies & Company, Kirkland & Ellis and Davis Wright Tremaine. The Ad Hoc Committee 7 operators of noteholders are being advised by UBS Securities and represented by Milbank, Tweed Hadley & McCloy.
Linklaters and K&L Gates are advising DISH Network and Sprint, respectively, while Curtis, Mallet-Prevost and Colt & Mosle are acting as attorneys for a committee of unsecured creditors.