Harbinger Capital Partners and Solus Alternative Asset Management have sought to scupper DISH network’s US$1bn bid DBSD North America by making a counter offer. The hedge funds have submitted a non-binding term sheet that proposes new plans of…
Harbinger Capital Partners and Solus Alternative Asset Management have sought to scupper DISH network’s US$1bn bid DBSD North America by making a counter offer. The hedge funds have submitted a non-binding term sheet that proposes new plans of reorganisation and debtor-in-possession financings for both DBSD and Terrestar.
Under the plan, DBSD would receive a replacement DIP facility of up to US$90m, which would be used to repay the existing DIP loan, fund bankruptcy related costs and provide working capital. All holders of the 7.5% convertible senior secured notes, which were due 2009, would have the opportunity to participate in the new DIP facility.
Harbinger and Solus then plan to fully repay all of those convertible notes held by DISH, approximately 15% of the US$750m outstanding. The other noteholders will be offered the choice of either receiving payment for their debt in cash, including accrued and unpaid interest, or equity in an amount sufficient to pay such obligations in full, based on a pro forma total enterprise value of approximately US$2.6bn. Any other secured claimants would also get their claims paid in full in cash, while general unsecured claims, predominantly from Sprint Nextel, would be paid in cash at a federal judgement rate.
As for Terrestar Networks (TSN), the term sheet also proposes 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. Again 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.
The reorganisation plan is also similar to the DBSD offer with the 15% notes held by EchoStar being paid in full and the remaining noteholders being offered a full cash settlement or equivalent equity stake based on the same pro forma enterprise value. The TSN 6.5% senior exhangeable 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 in both companies, any value remaining after payment of all claims will be allocated to them based on the total enterprise value of US$2.6bn.
The hedge funds have also opened the door for the potential acquisition of Terrestar Corporation at an agreed enterprise value.
On 1 March, in a declaration letter to the US bankruptcy court conducting the DBSD chapter 11 case, Stephen Blauner, managing director of Solus, said: “the Alternative Bidders (Harbinger and Solus) believe that the transaction contemplated thereby is superior to that submitted by DISH Network Corporation because the proposed transaction provides a greater cash component to holders of claims against the debtors and permits certain of such creditors the option to participate in the equity of the reorganised company if they so choose.” He added that he was surprised that the debtors had stated to the Bankruptcy Court in late February that only ‘non-binding expressions of interest’ had been been received and emphasized the serious nature of the bid. He also stated that the acquisition of DBSD is not stipulated on the concurrent bid for Terrestar.
At the beginning of February, DISH announced an investment agreement with the board of DBSD that would see DISH take full control of the company in return for paying all secured claimants, including holders of the 7.5% convertible notes, in full. The unsecured claimants, such as Sprint, would receive a partial payment.
This plan prompted a flurry of objections from both the Ad Hoc Committee representing the majority of DBSD’s 7.5% convertible noteholders and Sprint Nextel, arguing that it undervalued the company. DBSD’s parent company ICO Global subsequently reiterated its support for the investment agreement.
A bankruptcy court hearing to discuss both the investment agreement and objections to it was scheduled for 2 March but has now been postponed to 15 March and is now expected to include the alternative plan from the two hedge funds.
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 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.
