DirecTV’s agreement to acquire the Dish satellite and streaming TV business from EchoStar for a nominal fee of $1 is encountering resistance from Dish creditors, who are set to incur significant losses on their debt holdings. According to Ars Technica, creditors are not willing to accept the $1.6 billion reduction in the value of their debt, necessary for the merger to proceed.
Bloomberg has reported that a group of investors has gained a blocking position on Dish’s steering committee, giving them leverage to negotiate better terms or explore alternative outcomes through litigation. The deal requires the consent of over two-thirds of Dish bondholders for each series of notes, with a deadline set for October 29. EchoStar executives argue that debt holders would benefit from the merger by holding securities from a more stable and less leveraged entity. However, bondholders remain unconvinced.
S&P Global’s research note, cited by Variety, frames the debt exchange as akin to a default because it offers less value than the original securities. However, the new notes would feature an interest rate of 8.875% and be secured by the combined assets of DirecTV and Dish, providing some upside.
In the initial terms of the arrangement, DirecTV agreed to absorb $9.75 billion of Dish’s debt. Completion of the deal is contingent on approval from Dish’s debt holders, who will see new DirecTV debt instruments replacing their current holdings at reduced principal amounts. DirecTV’s announcement made clear that the deal can be voided if creditors do not consent to the adverse terms.