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Largest. Co-op. Ever. It’s now closed and is looking to take action.

Certain DISH Network and DISH DBS bondholders that organized with Milbank and Lazard and signed a cooperation agreement had a deadline of 25 January to join the group, meaning it is now closed to new members, sources told 9fin.

Furthermore, the group’s legal counsel has prepared documents seeking a temporary restraining order or a court order preventing specific actions during a period until a hearing can be held, also according to sources. The group held a call yesterday and has sent a letter to all members outlining the arguments it would make were it to file such a request, these sources said.

As for the co-op group itself, more than 80 institutions signed on, holding more than three quarters across each of the DBS secured, unsecured and DISH Network bonds.

All told, the group holds upwards of $11.5bn worth of bonds across the capital structure, according to sources, and may represent the largest co-operation group in history. For comparison, the Carvana bondholder co-op group that formed in late 2022 held less than half that amount. The members of that Carvana group were successful in fending off proposed debt swaps and wound up cutting a restructuring deal with the used car dealer.

In the latest co-op agreements, where a group of lenders and/or bondholders agree to not turn on each other for a given period of time, it has become increasingly common for the co-op group to become exclusive after a certain threshold has been reached to block various types of, or parts of, aggressive deals that involve stripping covenants or leapfrogging existing creditors in the repayment line.

For this DISH co-op, the initial lock-up period goes through 26 April, and can be extended on two occasions by 90 days, according to sources. New members can be voted in by the steering committee.

While DISH Network terminated an exchange offer for its senior notes, DISH has already moved spectrum and subscriber assets away from DISH DBS investors and into a newly formed subsidiary of EchoStar, a company with which DISH recently merged. Specifically, DISH stripped out three million TV subscribers from the DISH DBS box and put them into a new unrestricted box called the DBS Subscriber Subsidiary. As of the third quarter, ended 30 September, DISH had 8.84m subscribers split between 6.72m for its satellite service and 2.12m for Sling, its vMVPD.

The arguments that the co-op group’s legal counsel laid out to challenge the asset transfers include breach of the covenants under the indentures of the bonds at the DBS level, including not having achieved specific ratios necessary to do this maneuver; as well as various fraudulent conveyance claims. On the DISH level, the group believes it can make additional insolvency claims, as well as the fraudulent conveyance and breach of indenture claims.

Industry analysts who are not in the group suggest Charlie Ergen, the company’s chairman, has other options and ultimately could wait out the group and start picking off bondholders to strike side deals in order to address near-term maturities. For its part, EchoStar/DISH has been working with Houlihan Lokey and White & Case.

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DISH co-op group turns away new members and zeroes in on legal actions

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