Pegasus Media & Communications term loans have been up and down and up again as market participants anticipate both a Pegasus Media and Pegasus Satellite Communications Chapter 11 filing. The company’s $300 million “D” loan dipped from levels north of par to the 96-97 range before rising slightly to the 98 1/2-99 1/2 context. The “B” term loan went from the 98 3/4-99 1/2 level at the beginning of the month to the 96-97 context a banker added, before recovering to the 98 1/2 context mid-week. Market participants said the “B” loan is not being traded.
The movement has been caused by a California federal judge’s decision to put an end to a three-and-a-half year long dispute with DirectTV Group over a defaulted payment. Pegasus has been ordered to pay $51.5 million in damages plus $11 million of accrued interest to the satellite operator.
“Either they file [for bankruptcy] or they will have to sell some assets,” said Joel Luton, senior v.p. and director of research at APS Financial Corp. “It looks like [bankruptcy] is a distinct possibility,” Luton added. Under a bankruptcy scenario, Pegasus bank debt will not be impaired, he said. “They will continue to anticipate their interest payments,” he stated. He expressed some concern, however, over the company’s ability to continue to service its high-yield debt.
The company has dwindling liquidity and significant near-term maturities in its capital structure, according Moody’s Investors Service. The company could potentially cover the DirectTV judgment with cash on hand, but this would leave the company extremely thin in terms of liquidity. Moody’s has suggested that the sale of the broadcast operations will probably be necessary, now at a minimum, in order to allow the company to repay the portion of its senior secured credit facility that matures next year.
It is unclear whether Pegasus Communications Corp., the parent company of Pegasus Satellite and Pegasus Media, would have the liquidity to intervene in favor of its subsidiaries and make the payment to DirectTV, market participants said. Joe Pooler, Pegasus’ v.p. of finance and controller and Andrew Smith, an investor relations official, did not return calls.