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Dish Network offers $1.38 billion for TerreStar

An advertising sign in the lobby of the corporate headquarters of Dish Network shows current packages in the Denver suburb of Englewood
An advertising sign in the lobby of the corporate headquarters of Dish Network shows current packages in the Denver suburb of Englewood

NEW YORK (Reuters) - TerreStar Networks Inc said it has received a $1.375 billion cash bid from billionaire Charlie Ergen's Dish Network Corp to buy the telecommunications company's assets through a bankruptcy auction, court papers show.

Ergen, who also controls EchoStar Corp , has been competing against other potential bidders, including a group of senior noteholders and wireless communications company MetroPCS Communications Inc , people familiar with the process have said.

Dish will allow TerreStar to extend a deadline to obtain bids for its assets to June 27 from June 15, with a court-supervised auction to take place on June 30, according to a filing early Wednesday in Manhattan bankruptcy court.

Any sale requires court approval.

TerreStar has operated under Chapter 11 bankruptcy protection since October 19. Its most sought-after assets include wireless airwaves used by wireless service providers.

Dish is a so-called "stalking horse bidder," which makes an initial bid for assets of a company in bankruptcy.

Stalking horse bids are designed to ensure a company does not fetch unreasonably low bids for assets, which can harm creditors.

Any superior bid would have to top Dish's bid by $55.5 million, under procedures set by the bankruptcy court, according to Wednesday's filing. The breakup fee is $27.5 million.

Ergen is seeking for the third time this year to buy a large pool of assets through the bankruptcy process.

In March, Dish agreed to pay $1.4 billion for similar assets from DBSD North America, and the following month it agreed to buy movie rental chain Blockbuster Inc .

EchoStar, also a TerreStar creditor, in February walked away from a proposed debt-for-equity transaction involving the company after agreeing to buy broadband services provider Hughes Communications Inc for $1.33 billion.

In Wednesday's filing, TerreStar also said EchoStar, its so-called debtor-in-possession lender, would raise to $90 million from $75 million the amount of financing available for it to operate during the bankruptcy, provided Dish's bid were successful.

The case is In re: TerreStar Networks Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-015446.

(Reporting by Jonathan Stempel in New York; Editing by Maureen Bavdek)

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