NEW YORK (Reuters) - A $1.375 billion offer by Dish Network Corp for the assets of TerreStar Networks Inc won court approval as the minimum bid for the bankrupt satellite telecommunications company in an upcoming auction.
Judge Sean Lane on Tuesday approved the minimum offer, known as a stalking horse price, at a hearing at U.S. bankruptcy court in Manhattan, setting the stage for a bidding process the bankrupt satellite telecommunications company hopes will bring it out of bankruptcy.
The hearing came about a week after TerreStar announced a tentative deal with Dish, which is controlled by billionaire Charles Ergen. Bidders have until June 27 to make competing bids. If multiple parties make offers, an auction would be held on June 30, the results of which would go before Judge Lane for approval July 7.
The judge called the deal, which has the support of TerreStar’s creditors’ committee, a positive move for the company and its stakeholders.
“The lack of objections is a reflection of this being a good event for all concerned,” he said.
Any superior bid would have to top Dish’s bid by $55.5 million, under procedures set by the bankruptcy court. A $27.5 million breakup fee would be paid to Dish if it loses the auction.
If Dish does emerge as the highest bidder, TerreStar will become the latest piece of a burgeoning satellite empire. In addition to Dish, Ergen already controls EchoStar Corp and Blockbuster Inc, and in March won a bid through Dish to acquire bankrupt DBSD North America.
Arik Preis, an attorney for TerreStar, said a key piece of the deal is Dish’s willingness to fund 97 percent of the deal prior to gaining approval of the Federal Communications Commission.
Early payment would allow TerreStar to pay off a significant chunk of its debt, on which it is incurring $14 million to $16 million per month in interest, Preis said.
TerreStar has operated under Chapter 11 bankruptcy protection since October 19. The most sought-after assets of the company, which tried to make the world’s first satellite smart phone, include wireless airwaves used by wireless service providers.
EchoStar, also a TerreStar creditor, in February walked away from a proposed debt-for-equity transaction involving the company after agreeing to buy broadband services provider Hughes Communications Inc for $1.33 billion. EchoStar, which currently serves as TerreStar’s so-called debtor-in-possession lender, would raise to $90 million from $75 million the amount of financing available for it to operate during the bankruptcy, provided Dish’s bid were successful, Preis said.
The case is In re: TerreStar Networks Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-15446.
Editing by Steve Orlofsky