DBSD lenders ask court to force company to pay exit commitment amounts

By Caroline Salls

Pittsburgh, June 23 - DBSD North America, Inc.'s new credit facility lenders asked the U.S. Bankruptcy Court for the Southern District of New York to order the company to pay past due exit financing commitment amounts, according to a Wednesday court filing.

As previously reported, the lenders committed to provide $100 million of exit financing and to capitalize amounts due and payable under a $53.75 million 2009 commitment and add those amounts to the principal amount of the $100 million facility.

The company was required to pay commitment amounts equal to 2% of each lender's commitment, whether drawn or undrawn, the motion said.

The lenders said the exit facility and roll-up commitments "were necessary to preserve the feasibility of the plan [of reorganization]" and were used as leverage in secret negotiations to sell DBSD's equity to DISH Network Corp., likely increasing recoveries for the company's creditors and estates.

According to the motion, the company is refusing to pay the commitment amounts, claiming that the Second Circuit Court's reversal of the plan confirmation order reversed the bankruptcy court's authorization of the commitment letters and invalidated the commitment amounts.

However, the lenders said "that position is plainly incorrect and directly contrary to the Bankruptcy Code."

The lenders said the Second Circuit order only reversed the confirmation order in part and "neither addressed nor reversed the debtors' authorization to enter into the commitment letters."

"The new credit facility lenders extended the commitments and held them open for more than a year, for the benefit of all of the debtors' stakeholders, including other senior noteholders, unsecured creditors and equity holders," the lenders said in their motion.

"The new credit facility lenders incurred significant costs by carrying the obligation on their balances sheets for over a year.

"They should not alone bear the cost of lost opportunities to use the committed funds for other purposes, while all stakeholders benefitted from their actions."

A hearing is scheduled for July 25.

DBSD is a subsidiary of ICO Global Communications (Holdings) Ltd., a Reston, Va., mobile satellite services company. The subsidiary filed for bankruptcy on May 15, 2009. Its Chapter 11 case number is 09-13061.

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