EchoStar bondholders brace for default battle

EchoStar bondholders reportedly hired a law company as it faces the possibility of bankruptcy due to US Federal Communications Commission (FCC) probes into its Boost Mobile network build and unused spectrum.

Bloomberg reported the company hired Akin Gump Strauss Hauer & Feld following a decision at the end of May to skip a cash interest payment on its 10.75 per cent senior spectrum notes due in 2029.

EchoStar noted in the filing it has a 30-day grace period to make the interest payment “before such non-payment constitutes an Event of Default”.

FCC chair Brendan Carr wrote to EchoStar on 9 May.

As part of a public notice, the FCC is determining whether EchoStar plans to use its mobile satellite services (MSS) operations in the 2GHz band after SpaceX questioned it.

In a separate public notice, the FCC is also looking into EchoStar’s compliance with its 5G build milestones.

The regulator’s actions have “effectively frozen EchoStar’s decision making, it cannot reasonably invest more capital into a buildout if the Commission indicates it may take away its licences through unprecedented actions,” the company wrote in an FCC filing.

EchoStar billionaire Charlie Ergen repeatedly made attempts to schedule a meeting with Carr dating to 2024 before he became chair earlier this year, the company stated in a filing on 6 June.

In a letter to Carr dated 12 May, Ergen stated he “tried on several occasions to meet with you to update you on our significant progress, including new momentum with acquiring customers and upgrading our network”.

Bloomberg previously reported EchoStar has debt maturities of approximately $7 billion.