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TPG’s bid to create a $23 billion US satellite TV group capable of competing with Netflix faces collapse as the private equity group finds itself in an impasse with creditors over a restructuring of the debt on which the agreement depends.
DirecTV, the satellite TV provider TPG controls, agreed to pay a face value of $1 last month for Dish Network, its closest rival, offering bondholders about $8 billion in bonds exchanged for existing Dish notes with a face value of ‘a little less than 10 billion dollars.
According to documents seen by the Financial Times, Flat creditors pushed DirecTV to reduce the $1.6 billion discount to about $300 million, but the bidder refused to change its terms.
Letters between DirecTV and members of the bondholder group, including BlackRock, show the two sides are at an impasse, threatening the exchange offer less than two weeks before its Oct. 29 expiration.
Holders of two-thirds of the bonds by value must agree to the exchange for the merger to be finalized. If the offer fails, DirecTV may terminate the contract before November 9.
“The group’s (bondholders’) expectations, as reflected in the proposal, do not represent terms that DirecTV will accept and, further, DirecTV does not intend to restructure the terms that have been negotiated at length between the parties “, Ryan Preston Dahl, Ropes & Gray attorney. representing DirecTV, said in a letter sent Sunday to Lazard and Milbank, which advises Dish bondholders. “Time is running out,” he said.
Dish is a subsidiary of EchoStar, the publicly traded satellite operator controlled by Charlie Ergen. The billionaire has been locked in a fight with creditors of EchoStar and Dish, collectively holding nearly $22 billion in debt, for nearly a year as the parent company faces potential bankruptcy.
Bondholders had sued EchoStar, claiming it had put the Dish guarantee out of their reach in an early 2024 maneuver.
EchoStar announced a complex balance sheet restructuring last month that included various debt swaps, capital raises and the planned tie-up between Dish and its longtime rival.
DirecTV hopes the enlarged company can challenge video streaming leaders such as Apple, Disney and Netflix with a satellite TV offering aimed at budget-conscious customers. Together, DirecTV and Dish reportedly have 18 million paying subscribers.
DirecTV insisted that reducing its offer to bondholders was necessary to ensure the new company was not overleveraged. Under the deal, different Dish bonds would receive discounts of between 7 cents and 40 cents on the dollar, swap values higher than the prices they were trading at before the merger was announced.
TPG, DirecTV and BlackRock declined to comment. Lazard and Milbank did not respond to requests for comment.
About 80 percent of Dish bondholders formed a so-called cooperative group, meaning they agreed to negotiate a deal with DirecTV as a collective. However, DirecTV alleged that some bondholders hold credit default swaps and therefore have a conflict of interest because these insurance contracts would pay them a windfall if Dish were forced into bankruptcy as a result of a canceled merger.
The cooperative agreements have angered borrowers and private equity firms, who increasingly argue they raise antitrust concerns by restricting free trade. In its letter, DirecTV alleged that Dish’s creditor group was threatening to “eliminate competition among market participants” and “limiting (the company’s) ability to restructure.”
TPG said in its letter that it would still give Dish the $2.5 billion loan it agreed to in September, regardless of the status of the merger.
