DTH provider Dish Network is to acquire Terrestar Networks for approximately US$1.375bn after no higher bids were made. A New York bankruptcy court hearing to approve the sale is now scheduled for 7 July.
On 14 June, Terrestar entered into a purchase…
DTH provider Dish Network is to acquire Terrestar Networks for approximately US$1.375bn after no higher bids were made. A New York bankruptcy court hearing to approve the sale is now scheduled for 7 July.
On 14 June, Terrestar entered into a purchase agreement with Dish whereby the latter became the debtor’s stalking horse bidder. Under the bid procedures, any potential rival would have needed to make an incremental offer that was at least US$55.5m higher than Dish’s by 27 June. With none forthcoming, the debtors moved to cancel the planned auction scheduled for 30 June and sell its assets to the stalking horse bidder.
SatelliteFinance understands that rival bidders for Terrestar’s assets included Harbinger Capital Partners, the activist hedge fund that owns the majority of LightSquared, US-based wireless operator MetroPCS and a group of Terrestar first lien debt holders.
Dish’s offer is worth around US$90m more than the Terrestar’s total secured debt, which comprises the US$944m outstanding of 15% senior secured PIK Notes, the US$100m TerreStar-2 Purchase Money Credit Agreement and the accrued and agreed Debtor-in-Possession financing. EchoStar, Dish’s sister company, holds around 50% of this debt.
The price means that holders of the unsecured debt, including the US$200m unsecured 6.5% senior exchangeable PIK notes, will receive less than 50 cents on the dollar, while the Terrestar Network shareholders will receive nothing. Terrestar Networks is 88% owned by Terrestar Corporation and 12% by LightSquared.
This deal is particularly galling for Harbinger given both its ownership of LightSquared and that back in October 2010 it began buying the unsecured exchangeable notes for an average of around 75 cents on the dollar. Once it had taken control of most of the notes, Harbinger then launched an offer for Terrestar Networks at the beginning of 2011 alongside fellow hedge fund Solus Alternative Asset Management. That offer proved unsuccessful but Harbinger has retained its interest in the Terrestar assets ever since.
Given LightSquared’s current issues with the potential inference to GPS signals caused by its portion of North American L-band spectrum, Terrestar’s 20GHz of S-band spectrum had offered a potential wireless spectrum alternative. However, following the failure of Harbinger to top Dish’s bid that avenue has effectively closed and the company will continue to work on its workaround plans.
As for Dish, if, as assumed, judge Sean Lane rules in favour of the deal, then it will have been successful in acquiring both bankrupt ATC licence holding satellite operators. Back in March, the DTH provider proved successful in its bid for DBSD North America with the bankruptcy court approving its US$1.4bn offer.
The dual purchase gives Dish 40GHz of S-band spectrum and has prompted much speculation as to what the company plans to do with it. Dish has yet to make any announcements on its future strategy although Charlie Ergen, the company’s founder and majority shareholder, has previously spoken of wireless broadband being the future of video distribution.
Blackstone is Terrestar’s financial adviser for the process, while Akin Gump Strauss Hauer & Feld and Fraser Milner Casgrain are its legal counsels. Willkie Farr & Gallagher is legal counsel to EchoStar, with Weil, Gotshal & Manges counsel to Harbinger Capital Partners and Quinn Emanuel Urquhart & Sullivan representing the ad hoc group of the 6.5% senior exchangeable noteholders including Solus. Terrestar Networks (Canada) has hired CIBC World Markets as financial adviser.
