Dish Network Wins Right to Be ‘Stalking Horse’ Bidder at Terrestar Auction

Dish Network Corp. (DISH) won bankruptcy court permission to be the opening bidder at an auction for the assets of Terrestar Networks Inc., a satellite provider of wireless communications.

U.S. Bankruptcy Judge Sean Lane in New York approved Dish Network, the second-largest satellite television provider in the U.S., as the so-called stalking horse bidder, with an offer of $1.38 billion. Any rival offer must start at $55.5 million more than the stalking-horse bid. The bidding deadline is June 27 and the auction is scheduled for June 30.

“The lack of objections is reflective of this being a good event for all concerned,” Lane said today in court.

Terrestar, based in Reston, Virginia, said it spent almost a year seeking a buyer. Englewood, Colorado-based Dish’s bid is $150 million more than a valuation of the company included in an outline of the reorganization plan in December, Terrestar said in court papers. It also exceeds Terrestar’s $1.1 billion of secured debt. The purchase agreement was signed on June 14.

The judge also approved a breakup fee of $27.5 million to be paid to Dish if it doesn’t win the assets, and an expense reimbursement of as much as $3 million. A hearing to approve the sale is scheduled for July 7.

Dish is likely buying Terrestar for its “valuable broadband spectrum,” Dave Novosel, an analyst with Gimme Credit LLC, said in a report June 16. The spectrum can be used for wireless services.

EchoStar

EchoStar Corp. (SATS), an affiliate of Dish, agreed to increase its Chapter 11 financing for Terrestar to $90 million from $75 million. EchoStar is a holder of Terrestar’s secured debt.

Terrestar, which began operating in 1988, filed for Chapter 11 creditor protection in October 2010.

Financing agreements “did not provide Terrestar with sufficient revenue to service its outstanding debt obligations while maintaining the capital expenditures necessary to finalize development of its technology,” Jeffrey Epstein, the chief executive officer of Terrestar, said in court papers at the time of the filing.

Arik Preis, a lawyer for Terrestar, said that because of a possible delay in receiving Federal Communications Commission approval of the sale, Dish has agreed to fund 97 percent of the purchase price before the regulatory agency signs off on the deal. A purchase of Terrestar must win regulatory approvals from the U.S. and Canada.

In April, a bankruptcy court approved Dish’s acquisition of video-rental chain Blockbuster Inc.’s assets for $320.6 million after an auction. Dish also acquired satellite communications company DBSD North America Inc. out of bankruptcy.

Dish rose 75 cents, or 2.7 percent, to $28.64 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading. The stock has gained 46 percent this year.

The case is In re Terrestar Networks Inc., 10-15446, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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