Bankruptcy Filing Could Improve EchoStar's Negotiations With FCC: New Street
EchoStar’s decision Friday not to make a $326 million cash interest payment due that day on corporate debt that matures in 2029 (see 2505300001) could give the company more leverage to negotiate over spectrum with the FCC, New Street’s Blair Levin told investors Monday. New Street believes FCC Chairman Brendan Carr’s strategy “is to put a cloud over the value of [EchoStar’s] assets while using procedural maneuvers to keep [EchoStar] from challenging those actions in the Court of Appeals,” Levin wrote. The company also told the SEC on Monday that it wasn't making an $183 million interest payment due that day on notes that mature in 2026, 2028 and 2029.
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Levin noted that if EchoStar files for bankruptcy, the company could look to the 2003 U.S. Supreme Court decision in the NextWave case (see 0301280024). That ruling “held that the FCC revoked the [NextWave] licenses solely due to nonpayment, a dischargeable debt under bankruptcy law,” Levin wrote. “Doing so violated Section 525(a) of the Bankruptcy Code, which prohibits governmental units from revoking licenses solely due to a debtor's failure to pay a dischargeable debt.”
“As a practical matter,” the bankruptcy court “provides an institutional ability to question and challenge FCC actions,” the analyst wrote. “The bankruptcy process will be, in a sense, a negotiation, but having the bankruptcy judge, as well as the other stakeholders, as part of that negotiation, undercuts Carr’s leverage.”