A group of Dish Network Corp. creditors sent a letter to the company’s board alleging that the satellite television provider’s restructuring plan is illegal, and threatening legal action if the deal isn’t reversed, according to people with knowledge of the situation.
The creditor group, working with law firm Milbank, argued in the letter sent Friday that the company’s plan to swap nearly $10 billion of debt for new secured notes violates debtholder agreements, said the people, who asked not to be identified because the communications are private. The letter also alleges that Dish’s move to transfer prized collateral away from existing creditors could be considered fraudulent, and an illegal dividend.
Such claims in controversial restructuring deals are increasingly ending up in court, where they can take months or years to be resolved.
Dish creditors have been up in arms since earlier this month, when the struggling company moved assets including crown-jewel wireless spectrum licenses out of reach of existing bondholders. It later proposed exchanging $4.9 billion of convertible notes and $5 billion of bonds for new securities issued by its parent company EchoStar Corp. and backed by those licenses and 3 million television subscribers.
The maneuvers sparked a widespread selloff in Dish’s debt and a wave of creditor organization. The Milbank group holds more than $10 billion of Dish debt, including a majority of the company’s 11.75% notes due 2027, according to the letter.
A representative for Houlihan Lokey, which is advising EchoStar, declined to comment. Representatives for EchoStar and Milbank didn’t respond to requests for comment made outside of normal business hours.
Bloomberg reported earlier this month that the Milbank group was examining legal options including sending a default notice to the company. Englewood, Colorado-based Dish has more than $20 billion of debt, and is seeking to extended upcoming maturities to give it more time to pivot its business toward wireless services.