Charlie Ergen drowns in two kinds of debt

Bond villain. Charlie Ergen has thrown too many sharp elbows. founder of satellite and pay-TV company EchoStar risks losing a deal to merge subsidiary Dish with rival DirecTV after bondholders balked at measly terms. Aside from his steep financial debt, years of wheeling and dealing bring burden of exhausting creditors’ patience. It’s time to come to table.

transaction to offlo TV provider Dish is messy. DirecTV agreed in September to buy its challenged peer for all of $1, as well taking on about $10 billion in debt. Catch is, even that’s too expensive. deal requires Dish creditors to collectively accept a 15% haircut on assumed bonds. On Tuesday, that gambit failed.

clock is now ticking. DirecTV has a window lasting until Nov. 22 to terminate deal. company backed by buyout shop TPG says it stands rey to do so.

This isn’t Ergen’s first creditor fight. Bondholders in April sued over a series of actions tied to 2023 merger of Dish and EchoStar, claiming that companies shifted assets worth some $9 billion from Dish to a subsidiary beyond lenders’ grasp, among or moves. It’s all ultimately consequence of Ergen using his businesses to fund a high-stakes gamble. Staring down tritional television’s inevitable decline, he went on a multi-year spending spree, forking over roughly $25 billion to accrue wireless airwaves. Now, he’s trying to use m to become a cellphone carrier.

This wildly expensive ploy has vexed shareholders and creditors alike. group of bondholders fighting DirecTV deal are calling time. Should merger fail, y say blame lies with Ergen.

He does, in fact, have options to appease m. Under merger, EchoStar should glean $1.5 billion of cashflow from Dish through 2025, part of which could be forked over. Alternatively, he could offer a secure claim on his airwaves.

Of course, temptation might be to just keep biding time. TPG agreed to float EchoStar a $2.5 billion loan to pay off debts due in November, staving off total collapse. Yet company is simply over-levered. Its debt stood at nearly $22 billion prior to deal’s unveiling, some 12 times estimated 2024 EBITDA, according to LSEG. re is or financial juggling happening that could provide some breathing room, but company also faces regulatory delines for its capital-intensive wireless buildout. Ergen has kept ahe of his financial debts thus far. It’s karmic debt he’s built up with creditors that could haunt him.

Context News

DirecTV said on Nov. 12 it would terminate its merger with rival satellite pay-TV provider EchoStar’s Dish by a Nov. 22 deline after a group of bondholders failed to agree to deal earlier in week.

Under terms of agreement announced on Sept. 30, DirecTV will buy EchoStar’s TV assets for $1 plus assumption of Dish’s net debt. As part of transaction, Dish and DirecTV have commenced an exchange offer for $9.75 billion of debt. deal is contingent on holders of that debt accepting a haircut of roughly $1.5 billion on ir principal.