BANKRUPTCY JUDGE REJECTS ECHOSTAR'S LORAL BID
A federal bankruptcy court judge Wed. rejected EchoStar’s $200 million bid to buy Loral Space & Communications’ 7S satellite, ruling that the proposed acquisition raised both credibility and antitrust issues.
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Afterward, EchoStar Senior Vp-Gen. Counsel David Moskowitz said that in light of the ruling, the company had withdrawn its earlier $185 million offer for all of Loral’s assets. EchoStar CEO Charles Ergen said: “We're disappointed in the judge’s ruling as we believe we had a superior bid for the satellite assets. We… look forward to continuing to work with them as they emerge from bankruptcy.” An EchoStar spokesman said the company no longer planned to pursue the assets.
U.S. Bankruptcy Court Judge Robert Drain, N.Y., in a decision issued from the bench after a 5-hour hearing that ended Tues. night, backed the Loral motion allowing it to complete construction of the 7S satellite for DirecTV and proceed with work on 3 other manufacturing contracts for the company. Loral CEO Bernard Schwartz told us Drain’s decision was an “appropriate” ruling that “vindicated” Loral’s position and would allow the company to start work on satellites 8 and 9S for DirecTV and a separate bird for PanAmSat.
DirecTV, which had paid all but $19 million of the $140 million cost of the 7S satellite before Loral’s filing for bankruptcy protection in July, increased its offer by $25 million earlier this week in an effort to ward off EchoStar. Loral is to deliver the 7S to DirecTV by Dec. 31 with a launch possible as soon as Feb. 15. The 7S satellite is to be DirecTV’s first spot beam bird.
Judge Drain ruled that EchoStar, in entering a bidding war with DirecTV for 7S, was motivated more by seizing an opportunity to hamper a competitor than by plans to use the satellite for commercial purposes. “I needed more information from EchoStar as to why it needed this satellite for its own commercial purposes rather than knocking DirecTV out of the box for the day,” Drain said. EchoStar had enhanced its proposal Tues., offering an alternative of $60 million in cash as a nonrefundable deposit on the 7S plus a commitment to indemnify Loral against any damage claims related to the sale. In addition to its $200 million offer, EchoStar said it was willing to spend $35 million to retrofit the 7S and remove DirecTV technology, a process that Loral officials said could take 18-24 months.
But the indemnity offer was a “problem waiting to happen” that raised “serious litigation issues,” Drain said. In reaching his decision, he said he “took seriously” letters from Mo., N.Y. and Pa. attorneys gen. that said EchoStar’s proposal raised antitrust issues and could suppress competition. In particular, Drain said, the offer to indemnify Loral for litigation could be found illegal under antitrust law.
In the end, Drain said he deferred to Loral management’s “business judgment” and maintained that EchoStar needed “a more concrete proposal on the table.” The EchoStar proposal, he said, was a “moving target” that changed constantly. EchoStar also proposed buying Loral’s 6 N. American satellites, but had its $1 billion bid surpassed at auction by Intelsat’s $1.1 billion offer.