ICOG Ico Global Communications Holdings Limited De (MM)

Investors in DBSD North America Inc. are objecting to the company's proposed sale to Charlie Ergen's Dish Networks Corp. (DISH), calling it highly risky and expensive. They say DBSD should move forward with its previously proposed plan, which would allow the company to exit bankruptcy within a month.

In a filing Tuesday with the U.S. Bankruptcy Court in Manhattan, an ad-hoc committee of DBSD's senior secured convertible bondholders said that in announcing the $1 billion proposed sale of the company to Dish earlier this week, DBSD "failed to disclose to the court a crucial fact" that a settlement on the existing plan was reached between all parties other than Dish that would've led to a speedy exit from bankruptcy.

"The DISH sale process--if allowed to proceed in place of approval and consummation of the amended modified plan--assures only one thing: the continued languishing of the debtors in bankruptcy," the ad-hoc committee says in its court filing. The noteholders also say that the Dish deal has too many contingencies, and that many creditors would get worse recoveries than under the modified existing plan.

A spokesman for ICO Global Communications Holdings Ltd. (ICOG), DBSD's parent company, declined to comment.

Dish earlier this week agreed to buy DBSD, which has been mired in bankruptcy after its original exit plan was overturned on appeal last December.

The deal, which also includes interest accruing on DBSD's debt, needs approval from the Federal Communications Commission and is subject to DBSD's emergence from bankruptcy.

Dish said it will provide a debtor-in-possession credit facility to DBSD that will consist of a non-revolving, multiple draw term loan of $87.5 million. A hearing on the agreement in front of Judge Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan has been set for Feb. 15.

Under the Dish buyout plan, Dish would get 100% of reorganized DBSD's equity, pay DBSD's senior notes in full, and provide what DBSD calls enhanced recovery for its unsecured creditors.

"Indeed, the alternate plan values the debtors at more than 150% of the valuation provided under the debtors' currently pending Chapter 11 plan," DBSD says in a court filing made Tuesday.

"The alternate plan further represents an opportunity for the Debtors to partner with an established participant in the satellite telecommunications space with the resources to fund the debtors' business plan and ensure postemergence viability going forward."

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

In 2009, Gerber confirmed DBSD's plan to exit bankruptcy, which would have called for bondholders to swap $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.

Both Dish Network and Sprint Nextel Corp. (S) objected to the confirmation, and they got their wish in late 2010 when a court overturned it. Dish had called the plan unfeasible, and Sprint objected to the way the plan placed it lower on the totem pole than other creditors.

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

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; joseph.checkler@dowjones.com

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