According to The Wall Street Journal, bondholders of the bankrupt DBSD North America and creditor Sprint Nextel are in arms over the much-reported deal to sell to Dish Network for $1.1 billion. Judge Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan seemed to agree, citing concerns that the Dish sale would hinder other potential buyers and saying that the deal is an “option to buy” rather than a sales agreement.
Dish, meanwhile, said it would provide “debtor-in-possession” financing of $87.5 million to DBSD, which, Dish lawyers said, was ample proof that Dish was serious about buying the beleaguered mobile satellite services company. In addition to the ad hoc bondholders,
DBSD North America, which is a subsidiary of ICO Global Communications, has been in bankruptcy protection since May 2009. The company, then known as ICO North America, launched a satellite in April 2008 for interactive mobile video, navigation and emergency assistance; content partners included NBC Universal, MTV Networks, Turner Broadcasting System and Discovery Networks.
Dish’s history in attempting to acquire DBSD dates back to the company’s bankruptcy. Last year, Dish voted against DBSD’s reorganization plan, which a judge overturned saying that Dish’s “ulterior motive” was that of a strategic investor rather than a creditor.
Dish Network has also bought up debt of another satellite operator, TerreStar Networks, which it could also potentially convert to equity. (TerreStar and DBSD each hold a 20MHz block of spectrum in the S-band.) The company also purchased 6MHz of the 700MHz spectrum in the FCC's 2008 auction. Kaufman Brothers analyst Todd Mitchell analyst told The New York Times that he believes DBSD is actually worth $2 billion to $3 billion and that ownership of DBSD’s spectrum would enable Dish to launch a LTE or other 4G network, with an FCC waiver to operate a terrestrial-only service.
Before Dish Network can build out this new service, however, it needs to secure the loan-to-own deal with DBSD. The U.S. Bankruptcy Court in Manhattan will hear the details of the agreement Feb. 15; the transaction still awaits FCC approval.