Hughes Satellite Debtors Start Mediation With Ad Hoc Group, UCC, EchoStar; Say Court Should Hold Off on Chapter 11 Examiner Scope

Relevant Documents:
Proposed Examination Scope Order
Debtors’ Response

The Hughes Satellite Systems debtors said today that they have begun mediation with the ad hoc noteholders group, the special independent board committee, the official committee of unsecured creditors and parent EchoStar, with Judge Marvin Isgur serving as mediator. The court should hold off on setting the scope of a chapter 11 examiner until mediation concludes and the special committee and UCC each finish their investigations of claims against EchoStar, the debtors argue.

Hughes laid out its position in response to a proposed order submitted by the U.S. Trustee on the scope of the examiner that Judge Alfredo Perez mandated at a hearing on Aug. 26. Judge Perez will hold a hearing on the examiner’s scope tomorrow, Thursday, Sept. 17 at 3 p.m. ET.

The debtors say the UST’s proposed order would empower the examiner to conduct an “overbroad” probe into all the investigation topics set forth by the UST and the ad hoc group in their examiner motions. This would duplicate the estate-funded, independent investigations already being conducted by the special committee and UCC, according to Hughes.

The debtors also maintain that the ad hoc group is conducting its own investigation, armed with “all materials” that the debtors are providing to the UCC. The UCC has alleged that EchoStar is obstructing its claims investigation by blocking its access to documents provided to the special committee.

Hughes argues there is “no need for an additional estate-funded investigation,” which would “result in waste of estate resources and liquidity.” The debtors assert that the court should defer establishing the scope of the examination until there is “greater clarity” on their liquidity, and the mediation and other investigations conclude.

If the court is inclined to establish the examiner’s scope and budget now, the debtors say their revised proposed order should be entered. Hughes explains that its proposed order would cap the examiner’s budget at $100,000 and limit the examiner’s role to “assuring that the Special Committee and Creditors’ Committee conduct appropriate investigations.”

The UST’s proposed order does not specify a budget, but would give the examiner seven days after their appointment to confer with other parties and file a work plan with an estimated budget. The work plan would be subject to court approval after a hearing on seven days’ notice.

The debtors’ proposed scope order also includes other changes to the UST’s proposal, including for confidentiality protections, privilege non-waiver and cooperation provisions, shown in an attached blackline.