Dish Launches Debt Swap After Controversial Asset Transfer
(Bloomberg) -- The parent of Dish Network Corp. launched an offer to exchange about $4.9 billion of convertible debt for new bonds two days after freeing up some of its most valuable assets in a controversial maneuver that has angered many of its bondholders.
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The offer, announced in a statement late Friday, would allow holders of the convertible debt to swap their notes for new secured securities paying interest of 10% and backed by wireless spectrum that the company estimates is worth about $9 billion.
The deal would help the company tame a $20 billion debt load that has hindered co-founder Charlie Ergen’s plan to transition Dish away from its dwindling pay-TV business and toward wireless services.
Representatives for Dish didn’t immediately respond to a request for comment after normal business hours.
Holders of many of the company’s other bonds, however, have been nursing losses this week after the company announced it had transferred a handful of wireless spectrum licenses away from them and into a new legal entity under EchoStar. Dish also freed a new unit holding 3 million television subscribers from debt covenants.
Such maneuvers are often made to position a company to issue new debt from an entity that falls outside the reach of the company’s existing bondholders. The new bonds Dish is offering in the exchange would be backed by at least some of the transferred wireless spectrum.
As part of the exchange offer, the company — which recently reunited with its satellite network EchoStar in a merger — is asking holders of the convertible securities to agree to eliminate nearly all investor protections in the existing notes. The old debt would then be swapped for the new notes at a value of between 51 cents and 61 cents on the dollar.
The earlier transfer announcement prompted Dish’s bondholders to huddle with lawyers this week and explore legal options including whether they can make the case that the company is in default for moving the prized assets, Bloomberg reported Friday.
Dish’s bonds have plummeted for two straight days, and about $16.6 billion of its $20 billion of debt now trades at distressed prices, according to data compiled by Bloomberg. That compares with $9.3 billion before the announcement of the asset transfer.
(Updates with additional details throughout.)
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