Trading in DISH DBS gained steam this afternoon, with bonds across the capital structure moving higher following a Bloomberg report that the company is in talks with a group of creditors to hash out a lawsuit alleging the fraudulent transfer of assets. The confidential negotiations also include the possible extension of the issuer’s $2bn of 5.875% notes due Nov. 15, the report added.
The company, represented by White & Case and Houlihan, is expected to meet with the Lazard/Milbank-advised DBS crossholder group as soon as this week to discuss the suit filed by the group in April and amended in July, according to the report.
In response, the issuer’s $2bn 7.75% senior unsecured notes due 2026 advanced to 73.75 from the most recent prior trade at 67.5 on Aug. 30, trade data shows. Its nearest-dated $2bn 5.875% senior unsecured notes due November 2024 climbed to 98.4 versus 97.75 earlier this week. Meanwhile, on the other end of the maturity spectrum, its $1.5bn 5.125% senior unsecured notes due 2029 jumped seven points to trade at 52.5 this afternoon, from 45.5 on Aug.30.
The crossholder group sent a letter to management back in January, arguing that the company’s asset transfers earlier this year to address debt maturities could be considered fraudulent and that the distressed debt exchange offers – which were eventually pulled due to lack of acceptance from bondholders aligned in co-op agreements – were in violation of covenant protections, as LFI previously reported.
The transaction launched at the start of the year moved certain assets, including 3mn satellite TV subscribers and 2mn Sling TV subs, into an unrestricted subsidiary. The transaction created a subsidiary under parent EchoStar to house certain unencumbered spectrum licenses and reassigned $4.7bn of the $7.4bn intercompany loan, as CreditSights summarized.
In April, US Bank Trust Company, as trustee to the DISH DBS 5.75% secured notes due 2028 and 7.75% senior notes due 2026 filed suit against the company in the Supreme Court of the State of New York, County of New York in April.
A key element of the complaint brought by the group asserts that DISH DBS did not comply with the 8x test pro forma for the transfers. A recent amended complaint also outlines an additional cash transfer. “DBS transferred approximately $976mn to DISH Network in the last quarter of 2023 and the first quarter of 2024, all while being insolvent and carrying a going-concern qualification in its audit.”
Riding on the coattails of DISH, bonds backed by fellow EchoStar subsidiary Hughes Satellite Services also flew higher today, with its $749mn 6.625% senior unsecured notes due 2026 gaining more than six points to trade at 60.5, versus 54 yesterday, according to MarketAxess. Its $748mn 5.25% senior secured bond due 2026 edged up to 84.5, from 84 earlier this week.
Certain Hughes Satellite secured and unsecured bondholders mobilized around Jones Day, while a separate group of creditors has been working with law firm Glenn Agre Bergman & Fuentes as they look to pursue litigation against a costly lease arrangement that the creditors claim takes cash away from Hughes Satellite and funnels to parent EchoStar.
The lease structure – equating to a cash outflow of $191mn per year – “appears relatively egregious, considering Hughes contracted with Maxar to build the satellite at a cost of $445 million in 2017 (and Hughes received a credit for $57 million due to the delayed delivery of the satellite),” noted CreditSights analysts in a report published in April.
Erica Carnevalli
erica.carnevalli@levfininsights.com
+1 917 770 6402
Hema Oza
hema.oza@levfininsights.com
+1 917 841 0563
