Key Points
- Dish DBS and certain subsidiaries have filed for Chapter 11 under a prepackaged restructuring plan.
- As part of the Chapter 11 process, Dish will formally shut down its Dish Wireless business unit.
- Echostar, Boost Mobile, Gen Mobile, Hughes, Dish Network and Sling TV operations will continue without interruption.
Dish DBS Corporation and several of its subsidiary businesses have formally filed for Chapter 11 bankruptcy protection, confirming a report that first surfaced on Monday.
According to a statement shared with The Desk, the bankruptcy case is meant to accelerate debt repayment. As part of the case, Dish DBS is also winding down its Dish Wireless business, the statement said.
The case implements a restructuring agreement first unveiled in March and is backed by holders of more than 88 percent of Dish DBS’s secured and unsecured notes, along with creditors holding more than $8.8 billion of Dish Wireless debt.
Officials said the restructuring will allow Dish DBS to repay debt ahead of schedule while providing EchoStar with greater strategic flexibility following the previously announced sale of wireless spectrum licenses.
The Chapter 11 case was filed in the U.S. Bankruptcy Court for the Southern District of Texas and is expected to move quickly, with Dish targeting emergence before the end of the third quarter.
Echostar. the parent company of Dish DBS, said the proceedings will not affect customers, employees or ongoing operations. Dish Network, Sling TV, Gen Mobile and Hughes Satellite Systems are continuing normal operations and, with the exception of certain Dish entities, are not part of the bankruptcy filings.
“Echostar has been at the forefront of telecommunications for over 45 years, and these steps will position the business for an even stronger future,” Charlie Ergen, Echostar’s founder and chairman, said in a statement. “We are operating as usual throughout this process, delivering the same high-quality services that our customers expect.”
Stock Price
The restructuring follows delays in the closing of Echostar’s previously announced $20.25 billion spectrum sale to AT&T and SpaceX. Under the restructuring agreement, proceeds from that transaction are intended to repay an inter-company loan that would allow Dish DBS to retire approximately $2 billion of senior secured notes maturing July 1.
Because the AT&T and SpaceX transactions has not yet closed, Dish said it lacks sufficient liquidity to repay the notes while continuing to meet its ordinary operating obligations. Under the restructuring plan, those notes will be paid in full after the deals close or when the restructuring becomes effective.
The filing also marks the final phase of the transition of Dish Wireless, whose facilities-based 5G network is being decommissioned following regulatory actions that led Echostar to sell key wireless spectrum assets.
Creditors with qualifying claims related to the shutdown of the wireless network may recover through both the bankruptcy process and a separate $2.4 billion escrow fund that the Federal Communications Commission (FCC) required Echostar to establish as part of its approval of the AT&T spectrum transaction. Claims of less than $100,000 receive priority under the FCC-approved structure.
The companies are seeking court approval to continue paying vendors, suppliers and other trade creditors during the restructuring. The planned Chapter 11 filing was first reported Monday by the Wall Street Journal.
Earlier this month, Dish said it would miss an on-time debt repayment that was due on June 1 because of scrutiny imposed by the Federal Communications Commission (FCC) on its network build-out. Last year, Echostar sold some of its wireless licenses to AT&T and SpaceX, a move the company later said was made under duress. (FCC Chairman Brendan Carr has been a vocal supporter of SpaceX for several years.)
In a regulatory filing last year, Echostar said Dish DBS faces “intense and increasing competition from providers of video, broadband and/or wireless services” that serves as proof of the competitive and economic risks of the business.
“Changing consumer behavior and new technologies in our pay TV business may reduce our subscriber activations, and may cause our subscribers to purchase fewer services from us or to cancel our services altogether, resulting in less revenue to us,” Dish DBS executives warned in the disclosure to shareholders.
In May, Echostar revealed Dish DBS lost 366,000 pay TV customers during the first three months of the year, compared to a decrease of 381,000 pay TV subscribers one year earlier. The company has just over 6.6 million pay TV customers as of last count, putting it ahead of services like Hulu with Live TV and Fubo (on a non-consolidated basis), but behind pay TV products owned by Charter, Comcast, DIRECTV and Google’s YouTube.
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