(Bloomberg) — A group of Dish Network Inc.’s creditors told the company’s board of directors that the satellite TV operator’s restructuring plan is illegal and will face legal penalties if the deal is not withdrawn, according to people familiar with the situation. He sent a letter threatening to take action. .
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The creditor group, working with law firm Milbank, said in a letter sent Friday that nearly $10 billion in debt would be repaid in new secured bonds, said the people, who requested anonymity because the communications are private. It argued that the company's plan to exchange the debt was in violation of the debtor agreement. . The letter also argues that Dish's move to transfer valuable collateral from existing creditors could be considered a fraudulent and illegal distribution.
Such claims in controversial restructuring deals are increasingly being fought in court and can take months or even years to resolve.
Dish's creditors have been fighting back since earlier this month, when the troubled company moved assets including top-end radio frequency licenses out of the reach of existing bondholders. It then offered to exchange $4.9 billion in convertible debt and $5 billion in corporate bonds, issued by its parent company, Echostar Corp., for new securities backed by those licenses and 3 million television subscribers.
This maneuver triggered a wave of large-scale sales of Dish's debt and creditor organizing. Milbank Group holds more than $10 billion in Dish's debt, including most of the company's 11.75% debt due in 2027, according to the letter.
A representative for Houlihan Lokey, which advises EchoStar, declined to comment. Representatives for EchoStar and Milbank did not respond to requests for comment outside of normal business hours.
Bloomberg reported earlier this month that Milbank Group was considering legal options, including sending the company a notice of default. Inglewood, Colorado-based Dish has more than $20 billion in debt and is seeking to extend future maturities to give it more time to focus its business on wireless services.
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