EchoStar's Hughes satellite arm filed for Chapter 11 on Sunday, and the same 8-K discloses a committee set up to examine its dealings with EchoStar
Hughes filed on Sunday.
Hughes Satellite Systems Corporation, the satellite and enterprise broadband arm of EchoStar, and eleven wholly owned subsidiaries including Hughes Network Systems, LLC filed voluntary petitions for reorganisation under chapter 11 on 2 August, and have asked for the cases to be administered jointly under the caption In re Hughes Satellite Systems Corporation, case number 26-90739. The debtors also asked to keep running the business as debtors in possession. EchoStar disclosed all of it before the market opened on Monday.
The two documents in the filing do not describe the court identically. Item 1.03 of the 8-K names "the United States Bankruptcy Court for the District of Texas". The press release attached as Exhibit 99.1 names "the Bankruptcy Court for the Southern District of Texas, Houston Division".
The debt accelerated the moment the petition landed
Item 2.04 records the mechanical consequence. Commencing the cases is an event of default under the indentures governing HSSC's 5.25 percent senior secured notes due 2026 and its 6.625 percent senior notes due 2026, and the default triggers automatic acceleration of the obligations under both.
The same event then removes the remedy. Enforcement is automatically stayed, and creditors' rights are subject to the Bankruptcy Code.
Hughes says it has sufficient liquidity to fund operations in the near term and intends to use existing cash while it talks to bondholders about a go-forward capital structure. The company frames the reorganisation as a way to address maturing secured and unsecured debt and to accelerate a shift towards enterprise, government and defence work.
What is not in the filing
EchoStar Corporation is not a debtor. Neither are its non-Hughes subsidiaries, nor Hughes' own international subsidiaries. The release names DISH TV, Sling TV and Boost Mobile and states that the filing has no impact on them.
EchoStar and HSSC both caution in Item 8.01 that trading in their securities while the cases are pending is highly speculative, and that prices may bear little or no relationship to what holders eventually recover.
Four appointments in four days
Robert Del Genio, 67, a senior managing director of FTI Consulting, became chief restructuring officer on 28 July. Ramesh Ramaswamy, 66, who joined HSSC as a software engineer in 1985, was appointed executive vice president and general manager on 31 July. Paul Gaske resigned from every director and officer position at both companies on 28 July in connection with his retirement, and stays on as a senior adviser.
Also on 28 July, HSSC appointed Michael C. Buenzow and Anthony R. Horton as independent directors, to sit on a newly formed special committee. The filing states the committee was formed to review and evaluate certain related party transactions between HSSC and EchoStar and their respective subsidiaries.
White & Case is legal counsel to the filing entities and FTI Consulting is financial adviser. Epiq is the noticing and claims agent.
