Judge Says Creditors Can Vote On DBSD Sale To Dish

A judge on Monday said DBSD North America Inc. creditors can vote on the company's $1.4 billion sale to Charles Ergen's Dish Network Corp. (DISH), as DBSD moves closer to ending its two-year stay in bankruptcy.

Judge Robert E. Gerber of U.S. Bankruptcy Court in Manhattan approved DBSD's disclosure statement, or plain language reading of the company's bankruptcy exit plan on which creditors must vote. Gerber in March had called the plan "very, very favorable to the creditor community."

When asked by Gerber if he expected any creditor objections to the deal down the road, Kirkland & Ellis LLP's Ryan Bennett, a lawyer for DBSD said, "We don't, your honor."

The plan pays in full DBSD's creditors, including bondholders owed $740 million. The main voters on the deal are equity holders led by DBSD's owner ICO Global Communications Inc. (ICOG), a group that stands to recover $280 million. ICO, which owns 99.8% of DBSD's equity, would also get an additional $10 million on top of that from Dish.

DBSD hopes to have its bankruptcy plan confirmed by the court on June 30.

The company in March auctioned off its assets, with Dish's $1.4 billion offer coming out superior to others. In February, Dish had offered $1.1 billion.

In the disclosure statement, DBSD outlines its one remaining large dispute with Sprint Nextel Corp. (S), which still claims it is owed more than $104 million for a satellite license agreement.

That matter was sent to mediation by Gerber earlier this year. The Dish agreement proposed a $40 million settlement that Sprint could have taken immediately, but didn't. If it prevails, Sprint will get 100 cents on the dollar of whatever it recovers in that litigation.

DBSD filed for bankruptcy in May 2009 and had an earlier restructuring plan approved by Gerber.

That plan called for bondholders to swap their $740 million in debt for a 95% stake in the reorganized company. Dish, the sole holder of $40 million in first-lien loans, would have had its debt continued with the new company under amended terms.

But both Dish and Sprint objected to the confirmation, and in late 2010, a court overturned it. Dish had called the plan unfeasible, and Sprint objected to the way the plan ranked it lower than other creditors.

DBSD, based in Reston, Va., is developing a system that combines both satellite and terrestrial communications capabilities for wireless voice, data and Internet services.

Dish is controlled by satellite-television mogul Ergen, who has also tried to use his other publicly traded company, EchoStar Corp. (SATS), to bring TerreStar Networks Inc. out of bankruptcy. Ergen stepped down as Dish's chief executive last week but remains the company's chairman.

Dish recently bought Blockbuster Inc. (BLOAQ) in another high-profile New York bankruptcy court auction.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler, Dow Jones Newswires; 212-416-2152; [e-mail]