An agreement to merge Echostar’s pay television businesses Dish Network and Sling TV with rival satellite and streaming TV distributor DirecTV could be called off just before the Thanksgiving holiday, a spokesperson for DirecTV confirmed to The Desk on Tuesday.
The central issue that has the deal on thin ice involves a bond exchange offer that would see Dish Network’s creditors exchange around $9.75 billion in debt for new bonds that would have extended out the maturity date with a minimum loss of $1.5 billion, or $70 million lower than previously accepted.
Last week, reports indicated some of Dish’s creditors believed that was not financially feasible, and were holding out hope that Dish and DirecTV would agree to cut minimum losses by $300 million. On Monday, a consortium of creditors formally rejected Dish’s bond exchange offering.
A spokesperson for DirecTV said the bond exchange continues to be a major condition for its acquisition of the Dish Video business.
“Given the outcome of the EchoStar exchange, DirecTV will have no choice but to terminate the acquisition of Dish by midnight on November 22,” the spokesperson affirmed.
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On background, a source familiar with the deal said the rejection by Dish’s creditors doesn’t necessarily mean DirecTV’s purchase agreement will absolutely fall through on November 22, only that the company can walk away from the deal on that day. Both sides continue to discuss the matter, and Dish remains engaged with its creditors to find a solution before then, the source said.
The sale of Dish’s video business was largely seen as a way for Echostar to remain financially solvent, as the company has incurred a substantial amount of debt from the slow development and deployment of its own wireless network.
In a research note in August, MoffettNathanson researcher Craig Moffett said his firm found Echostar’s ability to operate a wireless network to be “vanishingly small,” and that if the company did not find ways to obtain new capital, “we believe EchoStar is instead highly likely to go bankrupt, quite possibly by the end of the year.”
Echostar itself has expressed concern over the matter, writing in a regulatory filing earlier this year that its cash burn was a serious issue. At the time, Echostar had around $521 million in cash on its balance sheet; with around $1.94 billion in debt maturing this month, Echostar executives said they were “forecasting negative cash flows for the remainder of the calendar year 2024.”
On Thursday, Echostar released updated financial earnings that rolled the company’s cash and cash equivalents with marketable investment securities as “cash on hand,” which totaled $2.722 billion. The company said it intends to fund $1.983 billion in debt maturing this month from that cash on hand amount.
