DBSD Must Consider Higher Buyout Offers, Judge Says
(Corrects seventh paragraph to say DBSD’s board in story published yesterday.)
DBSD North America Inc. has an obligation to creditors to consider any buyout offers that top one from Dish Network Corp., the judge overseeing the satellite- communications company’s bankruptcy said.
“We have been contacted by a third party,” Steven J. Reisman, a lawyer for DBSD’s creditors, told U.S. Bankruptcy Judge Robert Gerber today. Reisman, who didn’t identify the potential bidder, said an auction should be held to determine the highest bid amid “media reports” of a rival offer.
“There should be free access to a company that is in play, as this company seemingly is” Gerber said. “I expect aggressive efforts by the debtors to do whatever it takes to maximize value for the estate.”
Dish, the second-largest U.S. satellite-TV provider, agreed to buy DBSD for about $1 billion, after fighting the company’s bankruptcy plan in court. Philip Falcone’s LightSquared Wireless venture is considering bidding on satellite companies DBSD and TerreStar Corp., two people with knowledge of the company’s plans told Bloomberg News Feb. 4.
DBSD’s directors have a fiduciary duty to consider other offers and aren’t bound by any “no-shop” agreement until a formal offer is approved, Gerber said. Andrew Leblanc, an attorney for DBSD noteholders, said Dish’s offer is more of an option to buy than a firm proposal.
‘Option Contract’
“Should we allow this option contract to distract the company from exiting bankruptcy?” Leblanc asked Gerber.
Leblanc also said a trial is needed to determine whether DBSD’s board is conflicted because two members are from DBSD’s parent company, ICO Global Communications Holdings Ltd. Law firm Kirkland & Ellis LLP represents both companies.
“We believe this is a conflicted board represented by a conflicted counsel,” Leblanc said. A hearing is scheduled be held Feb. 15 to consider Dish’s offer.
DBSD, based in Reston, Virginia, filed for bankruptcy in May 2009 with about $800 million in secured debt, according to court papers. The bankruptcy plan calls for noteholders to receive most of the stock of the company.
Dish offered to provide DBSD with an $87.5 million non- revolving loan, according to a statement from the Englewood, Colorado-based pay-TV provider. The $1 billion includes interest accruing on DBSD’s debt.
The bankruptcy case is In re DBSD North America Inc., 09- 13061, U.S. Bankruptcy Court, Southern District of New York Manhattan).
To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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