EchoStar’s DISH DBS RSA Provides for About $6.5B in DDBS Debt Paydown Through 2026, Settlement of Noteholder Litigation; Paves Way to Reengaging DirecTV Combo Discussions

Relevant Document:
8-K
 

 

• EchoStar today announced a restructuring support agreement with noteholders representing “more than 82% of holders” of DISH DBS (DDBS) debt securities, addressing the company’s pay-TV subsidiaries that had approximately $14 billion of indebtedness outstanding and resolving its nearly two-yearslong noteholder litigation.
   
• In our view, this transaction’s deleveraging and the simplification of the DDBS credit box as well as the litigation settlement set the stage to revive combination discussions with DirecTV, allowing EchoStar’s pay-TV unit to engage in such negotiations from a stronger position. The RSA’s amendments to the relevant indentures directly address provisions related to a DirecTV combination.
   
• The quantum of currently nonparticipating minority noteholders could complicate fully executing the RSA out of court. However, to the extent that an in-court option is necessary, according to participants in the transactions, the RSA’s consenting creditors represent at least 73% of principal amount in each of the DDBS notes issuances, facilitating execution of the RSA, which would maintain EchoStar’s equity interest in DDBS, in court.

This morning, EchoStar announced that EchoStar Corp., DISH Network Corp., DDBS and certain DDBS subsidiaries entered into an RSA with an ad hoc group of noteholders representing more than 82% of holders of debt securities issued by DDBS.

EchoStar announced that on March 16, DISH DBS Issuer LLC, or DBS SubscriberCo, prepaid its outstanding 11.25% term loan and 13.75% preferred membership interests without penalty for approximately $1.6 billion.

Additionally, the RSA provides that EchoStar will fund approximately $5.159 billion in separate payments to DDBS and its noteholders, including:
 

• Approximately $2.19 billion in repayments of the “Q2 2024” and “Q3 2024” intercompany loans owed from DNC to DDBS;
   
• $125 million in a claim settlement amount to consenting creditors; and
   
• In line with the company’s recent spectrum transaction with AT&T, a full $2.844 billion repayment of the 2021 intercompany loan tranche B owed from DNC to DDBS.

The RSA also allows for the company to prepay, without penalty, DDBS’ $2.75 billion in 5.25% secured notes due Dec. 1 and $2 billion in 7.7% senior notes due July 1. In total, DDBS is expected to pay down approximately $6.5 billion in third-party debt and preferred equity through 2026 in large part from these proceeds, leaving approximately $5 billion of DDBS notes principal outstanding.

The RSA provides EchoStar with the ability to pursue these refinancing transactions either out of court or, “solely if necessary,” to effectuate the indenture amendments outlined in the RSA in a binding manner for all holders of DDBS 2026 notes and DDBS 2028 secured notes through a voluntary chapter 11 filing for DDBS and its related entities, which the RSA’s consenting creditors would be obligated to support. The RSA specifically names the U.S. Bankruptcy Court for the Southern District of Texas as a potential bankruptcy venue.

According to participants in the deal, the RSA’s consenting creditors represent the following percentage of principal amount of each DDBS issuance:
 

• 5.25% senior secured notes due 2026: 80%;
   
• 5.75% senior secured notes due 2028: 92.25%;
   
• 7.75% senior notes due 2026: 82%;
   
• 7.375% senior notes due 2028: 73%;
   
• 5.125% senior notes due 2029: 77%.

To the extent the company pursues a DDBS chapter 11 filing, which, in our view, could be an effective means to address any remaining holdout noteholders, it is required to notify the ad hoc DDBS noteholders committee’s counsel on or before March 31 at 11:59 p.m. ET. This election date may be extended, at the company’s discretion, in one or more increments of up to a total of 90 days.

Under the contemplated bankruptcy filing, DDBS would remain current on its interest payments, paying cash interest in full to the DDBS notes at the rates set forth in the notes’ indenture, including, “from and after the applicable maturity date consistent with the prematurity interest schedule if the Chapter 11 Cases extend past such date, unless such DDBS Notes are repaid, redeemed or repurchased in full on or prior to such maturity date.”

Specifically, under the contemplated in-court strategy, DISH DBS Corp.; DISH Broadcasting Corp.; DISH Network LLC; DISH Network Service LLC; DISH Operating LLC; DISH Technologies Holding Corp.; DISH Technologies LLC; Sling Media LLC; Sling TV Gift Card Corp.; Sling TV Holding LLC; Sling TV LLC; Sling TV Purchasing LLC; and any additional subsidiary or affiliate of DDBS that executes the RSA in the future will be a debtor in the chapter 11 cases unless otherwise mutually agreed.

DDBS’ capital structure as of year-end is shown below:
 

White & Case served as counsel to EchoStar. Milbank served as counsel to the ad hoc group of DDBS noteholders, and Lazard served as the group’s financial advisor.

Term Sheet Components

The RSA’s term sheet details the following steps to be effectuated on or about the date the agreement is executed.

Q2, Q3 2024 Intercompany Loan Paydown

DNC will pay DDBS approximately $2.19 billion on account of the 2024 intercompany loans, which reflects the full principal, PIK interest and accrued and unpaid interest through Nov. 30, 2025, plus any accrued and unpaid interest to the payment date. The “2024 Intercompany Loans” include:
 

• DNC’s $1.687 billion June 2024 intercompany loan, as of Dec. 31, 2025, owed to DDBS.
   
• DNC’s $518 million September 2024 intercompany loan, as of Dec. 31, 2025, owed to DDBS.

DBS/EchoStar $125M Nonrefundable Claim Settlement Amount

DDBS and EchoStar also agree to make the nonrefundable $125 million “Claim Settlement Amount” to the RSA’s consenting creditors.

The “Claim Settlement Amount” provides for:
 

• On the “Execution Date,” DDBS will pay the consenting creditors $75 million for their support of the refinancing transactions and “the payment of the reasonable and documented professional fees of Milbank LLP and Lazard Frères & Co. LLC incurred up to and including the Execution Date; provided, however, that the Claim Settlement Amount will be allocated as determined by the steering committee of the ad hoc group of holders of the DBS Notes represented by Milbank LLP.”
   
• As of the Execution Date, topco EchoStar Corp. agrees to pay, on June 1, the portion of the $125 million claim settlement amount owed to the consenting creditors, if any, that the consenting creditors have not received from another company party or affiliate.
   
• In addition, if the “Chapter 11 Election” is made, DDBS will pay the reasonable and documented professional fees of Milbank and Lazard “incurred during the chapter 11 cases on a current basis; provided that such fees and expenses shall not exceed” $10 million in the aggregate solely for the first 180 days of the chapter 11 cases, and thereafter no cap shall apply.

SubscriberCo Obligation Paydown

DDBS will pay off all of the obligations of DDBS SubscriberCo, including its term loans and preferred equity interests.

DDBS Restricted Group, DDBS SubscriberCo Reconsolidation

DBS SubscriberCo and its DBS subscribers will be reconsolidated with DDBS such that credit support for the DDBS notes will include all of the subscribers of the DDBS pay-TV business.

DDBS Restricted Group, SlingTV Reconsolidation

All company parties or their affiliates that in each case hold the SlingTV business assets will be consolidated with DDBS such that credit support for the DDBS notes will include the full value of the SlingTV business.

DDBS 2028 Secured Notes Cash Sweep Amendment

The indenture for the DDBS 2028 secured notes will be amended to include the “DBS Cash Sweep,” which provides for the following:
 

• “The indenture for the DBS 2028 Secured Notes shall be amended to require DBS to make an offer to repurchase DBS 2028 Secured Notes principal and accrued and unpaid interest on such notes, in each case at par without any premium, penalty, or charge, in an amount such that the price payable in connection with each such repurchase equals DBS’s ‘Available Cash’ (to be measured based on balance sheet cash at quarter end and defined in a manner to be mutually agreed) in excess of” $500 million.

The required offer to repurchase will be made on a quarterly basis commencing with the first quarter of 2027; “provided, however, that the cash sweep will be suspended automatically if DBS consummates a DirecTV business combination” (emphasis added), so long as:
 

• The combined company reaches, and remains below, a total net leverage ratio of less than 2.25x, without including pro forma acquisition-related synergies; or
   
• The aggregate principal amount of the DDBS 2028 secured notes is reduced to, and remains below, 50% or less of the aggregate principal amount of such notes outstanding as of the execution of the RSA;
  “provided, further, that the combined company shall not be permitted to make restricted payments under the indentures for the DBS 2028 and 2029 Notes.”

DDBS Notes Amendments Limiting Intercompany Transactions

The indentures for the secured and unsecured DDBS notes will be amended to:
 

• Limit the circumstances under which DDBS (or, in the case of a business combination, the surviving entity) may upstream cash or other value, including:
  • Tax distributions by DDBS being limited to the lesser of: “(x) the cash tax liability of DBS as a stand-alone corporate entity without giving effect to tax sharing agreements and (y) DBS’s proportionate share (based on taxable income) of the cash taxes of the consolidated group”;
  • Direct and indirect upstream payments to affiliates of DDBS in respect of usage of satellites (or other related services) being limited to market rates; and
  • Direct and indirect upstream payments being limited to the portion of corporate overhead reasonably allocable to DDBS;

• Limit the ability of DDBS and its subsidiaries to engage in further financing transactions constituting priming financings and other liability management transactions (to be defined in a manner mutually agreed);
   
• Reflect such modifications reasonably necessary to facilitate a potential DirecTV business combination, including a waiver or amendment to the applicable definition of “Change of Control” to permit such business combination so long as the combined company’s total net leverage ratio not exceed 2.75x at closing of the business combination, which does not provide for pro forma acquisition-related synergies; and
   
• Restrict DDBS’ and, if the DirecTV business combination is consummated, the combined company’s ability to incur any new debt for borrowed money with a maturity date before June 30, 2029.

Dismissal of DDBS Noteholder Lawsuit with Prejudice

The consenting creditors will cause the DDBS notes’ trustee U.S. Bank Trust’s lawsuit against the company “to be dismissed with prejudice.”

Mutual Releases

The parties will enter into “Mutual Releases,” which will be held in escrow and become effective only as of the “Effective Date.”

Effective Date Transactions

On or about the date on which the parties consummate the remaining refinancing transactions in accordance with the RSA and term sheet, or the “Effective Date,” the below will occur.

2021 Intercompany Loan Satisfaction

On or as soon as reasonably practicable after the closing of the AT&T’s transaction under which AT&T will purchase the EchoStar 600 MHz and 3.45 GHz spectrum licenses, DNC will:
 

• Pay DDBS approximately $2.845 billion plus accrued and unpaid interest on account of the 2021 intercompany loan tranche B; provided that it will be paid by Dec. 1, 2026;
   
• Pay or otherwise satisfy and discharge in full approximately $4.767 billion plus accrued and unpaid interest on account of the 2021 intercompany loan – tranche A;
   
• Release all liens or encumbrances with respect to the collateral that secures the 2021 intercompany loan.

DDBS 2026 Notes Optional Redemption Amendment

The indentures for the DDBS 2026 notes will be amended to permit the notes to be redeemed, at any time after March 31, 2026, at par plus accrued and unpaid interest to any such date of redemption without any premium, penalty, or charge.

Redemption of DDBS 2026 Unsecured Notes

If the DDBS 2026 notes amendments are implemented, DDBS will redeem any remaining DDBS 2026 unsecured notes at par plus accrued and unpaid interest to any such date of redemption without any premium, penalty or charge.

EchoStar Claim Settlement Amount

On June 1, EchoStar Corp. will pay the consenting creditors the portion of the $125 million claim settlement amount, if any, that the consenting creditors have not received from another company party or affiliate.

Mutual Releases

The mutual releases will become effective.