EchoStar-owned Hughes files for bankruptcy

Hughes Network Systems filed for Chapter 11 bankruptcy protection, seeking relief from $1.5 billion in debt which matured on 1 August with payment due the following day.

Hughes, the satellite broadband unit owned by Charlie Ergen’s EchoStar, stated in its bankruptcy filing the company lacked the cash and access to capital markets needed to pay off the debt.

The company had $102 million in cash on hand as of the end of March, according to its May earnings report.

In the filing, Hughes stated approximately 400 employees will be laid off while the company plans to transition away from its legacy consumer satellite broadband business.

It filed a motion in a Texas bankruptcy court to continue operating without interruption while the process plays out and stated it has enough liquidity to fund operations in the near term.

The company stated the reorganisation is intended to address its maturing secured and unsecured debt, strengthen its capital structure and accelerate a broader transformation into an enterprise, government and defence-focused business, while continuing to serve existing customers.

Hughes said it plans to use the process to engage with bondholders and other stakeholders on its go-forward capital structure and to develop a formal plan of reorganisation.

The company is seeking court approval of customary first-day motions to continue operating during the process, including paying employees, delivering for customers and channel partners, and fulfilling commitments to vendors.

Hughes provides broadband internet to subscribers across rural communities in North America and South America, alongside defence, airline and government customers. The company has faced mounting competition from low-earth-orbit satellite rivals, which has pressured its consumer subscriber base.

The news follows Chapter 11 filings by fellow EchoStar divisions Dish Wireless and Dish DBS, which cited delays in Dish’s spectrum sale to AT&T.

EchoStar’s non-Hughes subsidiaries, and Hughes’ international subsidiaries are not included in the filing.

Hughes noted the bankruptcy will not affect EchoStar or its other brands, including Dish TV, Sling TV and Boost Mobile.

Q2 EchoStar earnings
Separately, EchoStar reported Q2 profit, swinging from a loss a year earlier largely on the back of a substantial non-cash accounting gain, even as revenue and subscribers declined.Q2 total revenue was $3.5 billion, down from $3.7 billion a year earlier.

It posted net income of $8.4 billion, compared with a loss of $306.1 million.

Its retail wireless subscribers, which includes Boost Mobile and other brands, were down by approximately 118,000 compared to an increase of 212,000. The company closed the quarter with 7.38 million wireless subscribers.

Broadband subscribers were down by 59,000 compared to a decrease of 34,000. The company closed the quarter with 622,000 broadband subscribers.

Pay-TV revenue, EchoStar’s biggest revenue contributor, dropped 8.7% to $2.25 billion, as the company shed 241,000 subscribers to end the quarter with 6.39 million.