Traders and investors are waiting to find out if Pegasus Communications’ bank debt will be taken out at par or at 102. DirectTV has offered $875 million in cash for the cable company and it is expected to pay off the existing Pegasus debt. That debt carries call protection, but many market players expect the bankruptcy court to say par is good enough.
“It is definitely a question on where the debt is going to be taken out.” Some think it could be taken out at par because they see significant value in DirectTV’s offer for the company’s subscribers, a trader said. “In the end the court is going to decide par is enough,” another trader noted. A buysider noted, “102 would be better.”
The transaction, which has been approved by a committee of Pegasus’ creditors, still needs to get the consent of the bankruptcy court. The companies are trying to close the transaction by mid-September. However, “They said four to six weeks but I don’t see it happening before a number of months. Everything is going to be a negotiation,” a buysider said.
Pegasus’s “D” loan inched up to the 99 1/2-100 level after news of the purchase of the cable company came out, in the beginning of the week. A month ago Pegasus “D” piece has inched up to the 99 1/4-99 3/4 range after the company and its subsidiaries filed for Chapter 11 protection. At the time the company was trying to prevent the national Rural Telecommunications Cooperative (NRTC) and DirectTV from terminating Pegasus Satellite’s Television contract for the exclusive distribution of DirectTV. Pegasus has approximately $760 million o debt outstanding. Investor relations officials at Pegasus did not return calls.