Dish lenders call Directv’s current merger proposal ‘Unworkable’

Creditors to US satellite television firm Dish Network told DirecTV’s attorneys that the current merger proposal that calls for them to take an almost $1.6 billion loss is “unworkable,” according to a letter seen by Bloomberg.

DirecTV rejected a counteroffer from the group of bondholders, which holds about $8.9 billion of Dish notes, that proposed to adjust a debt exchange that the merger will be contingent on. Going forward, DirecTV can negotiate further, close the acquisition as is and “pay a premium to do so,” or face continued litigation, the group said.

The group said the two companies have “crafted a deal that allows DBS’s shareholder to further siphon billions of dollars of value away from DBS, while asking DBS’s creditors to voluntarily forfeit over $1.56 billion in value they are owed,” according to the letter. “It should be no surprise to anyone that such a deal is unworkable.”

Ropes & Gray, serving as DirecTV’s legal counsel, and Milbank, representing the creditor group, did not immediately respond to requests for comment.

Dish and DirecTV agreed to merge last month, which would create the biggest US pay-TV provider, a move designed to help both companies better compete in an increasingly crowded TV landscape disrupted by streaming.

But the deal is contingent on a series of transactions involving a number of key players including AT&T Inc., private equity firm TPG Inc. and Dish parent EchoStar Corp. One requirement is that bondholders consent to exchange old debt for notes issued out of the new combined entity, though the debt restructuring plan would impose haircuts as high as 40% of face value.

A group of steering committee investors gained a blocking position in order to negotiate with the company, Bloomberg previously reported. Bloomberg