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EchoStar stock plunged 13% Tuesday on the news that bondholders of subsidiary Dish Network rejected a proposed debt deal seen as key to sealing a merger with satellite rival DirecTV.
Shares fell to $22.76, their lowest level since early September, on triple their normal trading volume. On September 30, Dish and DirecTV had declared their intention to merge and create the largest U.S. pay-TV provider. While regulators thwarted previous attempts at a combination on anti-competitive grounds, the ravages of cord-cutting have left both players smaller and less dominant, thereby making approval this time arguably more likely.
DirecTV was spun off from DirecTV in 2021 into a private entity 30% owned by private equity firm TPG. In today’s streaming-centric media landscape, both satellite providers are at a competitive disadvantage with cable operators because they do not offer broadband service.
Even if Washington were to bless a merger, however, bondholders appear to be reluctant to let Dish off the hook. Late Monday, Bloomberg and the Wall Street Journal both reported that Dish bondholders owed some $10 billion spurned a proposed exchange deal despite the fact that the offer had been sweetened a bit. In a letter, they accused Dish co-founder and EchoStar chairman Charlie Ergen of “brazen conduct” and have already filed a legal complaint in an effort to not be left holding the bag.
Dish and EchoStar merged in January and the combined company has pursued a telco-oriented strategy, steering away from pay-TV in a bid to challenge establish players AT&T, Verizon and T-Mobile. With a large debt load and repayments looming, EchoStar has been trying to negotiate with lenders in order to stave off a potential bankruptcy.
Ergen, long a maverick figure in the media business, made cash-intensive bets on wireless spectrum when interest rates were low, only to get squeezed when rates steadily rose to multi-year highs over the past two years. The satellite merger was seen by the company and investors as a chance to hit the reset button, provided that all bondholders could be brought into the fold.
Amid the merger and debt drama, EchoStar reported third-quarter earnings Tuesday morning, divulging a loss per share of 52 cents and revenue of $3.89 billion. The metrics fell short of Wall Street analysts’ expectations.
The company ended the quarter with about 8 million pay-TV customers, counting both traditional satellite and the internet-delivered Sling TV.
In an announcement alongside the earnings release, EchoStar proclaimed “overwhelming support from our existing stakeholders,” saying that 96% of Dish bondholders participated in exchange offers. In all, the company said about $4.7 billion in 2025 and 2026 notes were exchanged, the company said, as well as the repayment of $2 billion in debt due this month and the issuance of $5.2 billion in debt due to be repaid by 2029.
