EchoStar weighing big high yield issuance, could launch by Friday

By Paul A. Harris

St. Louis, Mo., Dec. 12 - EchoStar Communications Corp. appears headed to the high yield market with a deal that could total more than $1 billion, syndicate sources told Prospect News. Although the anticipated size varies from source to source, estimates range from a low of $750 million to a high of $2.5 billion in conversations with over half a dozen sell-side sources Wednesday although the preponderance of opinion was that it would be about $1 billion in size.

Deutsche Banc Alex. Brown and Credit Suisse First Boston will run the books on the deal, syndicate sources say, adding that UBS Warburg and Lehman Brothers will be lead managers.

"We're getting everything ready to go, but the company has not made the decision," one syndicate source said Wednesday. "I think if it's going to come, it's going to be announced in the next two days."

Another syndicate source commented: "The known facts are obviously that they're in an agreement to buy the Hughes direct TV business. So they've got a lot of financing to do. But it's going to be a long-developing merger process, so the total financing need is pretty big, and I don't think they're going to do it all at once."

One market source told Prospect News that word of sizeable business from EchoStar began circulating on Friday, Dec. 7. That source speculated that EchoStar could be watching the upcoming Pegasus transaction - both as an indicator of the market's receptivity toward a satellite TV company, and also because EchoStar may be considering the acquisition of Pegasus.

"There are a lot of different rumors out there because of what's going on with GM Hughes, the source said.

"The deal is obviously not closed yet. It won't close probably until the second quarter of 2002. But if EchoStar were to win that, it does possibly mean that they would look to acquire Pegasus, because Pegasus does own some DirecTV assets, which is what GM Hughes is selling to EchoStar - the DirecTV business."

However in a ratings action today, Moody's Investors Service reached the opposite conclusion and said it is now less likely Pegasus and similar companies will be folded back into the DirecTV stable. Indeed, the rating agency cited that opinion as part of its rationale for lowering its outlook on the company to negative from stable.

Last month, EchoStar announced it had obtained a commitment for the $5.5 billion of bank financing needed to complete its planned acquisition of Hughes Electronics from Credit Suisse First Boston and Deutsche Bank.

The company initially obtained a $2.75 billion bridge commitment from Deutsche. CSFB then added a further $2.75 billion to replace the $2.75 billion of temporary bridge financing from General Motors Corp., Hughes' current owner.

EchoStar declined to comment when asked about the possibility of an upcoming bond deal.

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