In re Dbsd North America, Inc.
| Decision Date | 26 October 2009 |
| Docket Number | No. 09-13061 (REG).,09-13061 (REG). |
| Citation | 419 B.R. 179 |
| Parties | In re DBSD NORTH AMERICA, INC., et al., Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Kirkland & Ellis LLP by James H.M. Sprayregen, P.C., Esq., Christopher J. Marcus, Esq., Yosef J. Riemer, Esq. (argued), Lee Ann Stevenson, Esq. (argued), Matthew F. Dexter, Esq. (argued), Christopher V. Coulston, Esq. (argued), New York, NY, by Marc J. Carmel, Esq. (argued), Sienna R. Singer, Esq., Lauren M. Hawkins, Esq., Chicago, IL, for the Debtors and Debtors in Possession.
Curtis, Mallet-Prevost, Colt & Mosle LLP by Steven J. Reisman, Esq., Maryann Gallagher, Esq. (argued), Timothy A. Barnes, Esq., New York, NY, for Official Committee of Unsecured Creditors.
Milbank, Tweed, Hadley & McCloy LLP by Dennis F. Dunne, Esq., Risa M. Rosenberg, Esq., Michael E. Comerford, Esq., Jeremy S. Sussman, Esq., New York, NY, by Andrew M. Leblanc, Esq. (argued), Washington, D.C., for Ad Hoc Committee of Senior Noteholders.
Linklaters LLP by Martin N. Flics, Esq. (argued), Paul S. Hessler, Esq. (argued), New York, NY, for DISH Network Corporation.
K & L Gates LLP by John H. Culver III, Esq. (argued), Felton E. Parrish, Esq., Charlotte, NC, for Sprint Nextel Corporation.
BENCH DECISION1 ON CONFIRMATION
In this contested matter in the jointly administered cases of DBSD North America ("DBSD N.A.") and its subsidiaries (the "Debtors")—who have launched a satellite, and are in the developmental stages of creating a satellite system with components in space and on earth—the Debtors seek confirmation of their chapter 11 plan (the "Plan"). Confirmation is supported by the bulk of the holders of the Debtors' second lien secured debt (the "Second Lien Debt"),2 including an ad hoc committee of those holders (the "Ad Hoc Committee"), and the Official Committee of Unsecured Creditors (the "Creditors' Committee").
But confirmation is opposed by first lien creditor DISH Network ("DISH"), which bought up all of the first lien secured debt (the "First Lien Debt") in July (two weeks after the Plan was announced), at par, and for strategic reasons unrelated to a creditor's normal desire for the maximization of its recovery on its claims.3 The Plan also is opposed by unsecured creditor Sprint-Nextel Corporation ("Sprint"), which has pending claims (subject to asserted defenses) against Debtor New DBSD Satellite Services G.P. ("New Satellite Services"), one of the Debtors.4
The Plan will be confirmed. The following are my Findings of Fact and Conclusions of Law in connection with this determination.
Except by way of background, this decision doesn't spend time discussing undisputed issues. As requested, I will issue full Findings of Fact and Conclusions of Law, to the extent not inconsistent with those in this decision, which will include discussion of undisputed matters.
DBSD N.A.—a Debtor, and the parent company of the other Debtor entities—is an approximately 99.8% owned subsidiary of non-Debtor ICO Global Communications (Holdings) Limited ("ICO Global," referred to in Plan documents and the parties' briefs as the "Existing Shareholder"), a publicly traded satellite communications company based in Reston, Virginia. ICO Global and its predecessor entities have been in the satellite communications industry for over 14 years. ICO Global acquired substantially all of the assets, and assumed certain liabilities, of ICO Global Communication (Holdings) Limited ("Old ICO") pursuant to a reorganization plan in the prior chapter 11 case of Old ICO.
Following the reorganization and acquisition of Old ICO, ICO Global focused on developing a U.S. mobile satellite service (often called "MSS") business. ICO Global's challenges included the problem of signal blockages resulting from buildings and other terrain, and capacity limitations plaguing the satellite communications industry. To help meet these, ICO Global successfully lobbied the Federal Communications Commission ("FCC") to promulgate new rules to permit the integration of terrestrial components—i.e., related facilities on earth—into U.S. mobile satellite service networks. Following the FCC's promulgation of new rules that created a less-restrictive regulatory climate, in December 2004, ICO Global formed DBSD N.A. to develop an integrated mobile satellite and terrestrial services network (the "Satellite System"). DBSD N.A. and its direct and indirect subsidiaries—the Debtors in the chapter 11 cases—conduct all of ICO Global's North American operations, as well as certain international operations. The Existing Shareholder ICO Global is not a debtor in these chapter 11 cases. It is out of the money, but under the Plan, by reason of a gift from the Second Lien Debt to unsecured creditors and equity, the Existing Shareholder will get a distribution.
The Debtors are a next generation mobile satellite service operator authorized to offer satellite terrestrial services throughout the U.S. using a satellite. The Debtors conduct the majority of their operations in North America. Their principal offices are located in Reston, Virginia, and they employ approximately 40 employees. The Satellite System has been in development since 2004. The Debtors designed the Satellite System to permit its use with a wide-range of technology partners, and in January 2009, the Debtors received FCC authority for a ground support system for the Satellite System (called an ancillary terrestrial component ("ATC") and, together with MSS, ("MSS/ATC") services), subject to certain ATC "gating criteria"—FCC requirements with which any mobile satellite service operator seeking to modify its existing license to incorporate an ancillary terrestrial component into its systems must comply.
The Debtors intend to capitalize on the growth of the wireless sector in the U.S by using their Satellite System to offer satellite and terrestrial wireless service throughout the U.S. The commencement of a full-scale hybrid system utilizing both a satellite and land-based components (the "MSS/ATC Hybrid Network") will require a great deal of additional capital. Thus, the Debtors have been exploring opportunities to offer their services to strategic service providers who have the capacity to integrate the Debtors' satellite and terrestrial services with services already offered to their existing customers.
As described more fully below, the Debtors have:
(a) First lien secured debt (the First Lien Debt), entirely held by DISH, in the present principal amount of approximately $51 million,5 guarantied by all Debtors, which thus is an obligation of each of them;
(b) Second lien secured debt (the Second Lien Debt), held...
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