EchoStar Corp. failed to make $1.5 billion in debt payments owed by its Hughes Satellite Systems subsidiaries, triggering a second wave of bankruptcy filings in a little over a month.
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On June 30, the Douglas County company put its satellite television and wireless subsidiaries under bankruptcy protection after lacking the resources needed to pay back $4.75 billion owed to creditors.
On Aug 3, it did the same for its consumer satellite business after it couldn’t repay or refinance $750 million in secured and $750 million in unsecured debts that were due at the start of the month.
Hughes operates a network of geostationary communications satellites (GEO) that are struggling to compete with Starlink, the Low Earth Orbit (LEO) satellite network that SpaceX has built.
The number of broadband subscribers at Hughes has dropped nearly 22% to 641,000 customers in the past year, according to a court filing made by Robert del Genio, the company’s chief restructuring officer.
“The company does not expect this trend to reverse,” he wrote. “LEO satellite competition is structural, not cyclical, and the company’s competitors continue to expand coverage and reduce costs.”
Hughes customers, as with the wireless and TV side, should see no disruption to service and the parent company, EchoStar, remains shielded from the process.
That said, Hughes plans to pivot away from its consumer business to focus on enterprise and commercial customers.
One reason the company has struggled is that its GEO satellites, which are about 22,000 miles above the earth, have a latency or signal transfer time of about 600 milliseconds.
LEO systems, which orbit closer to Earth, have a latency of about 20 to 40 milliseconds while handling larger volumes of data.
EchoStar, under pressure from federal regulators, arranged two large sales of its wireless spectrum last year — $23 billion to AT&T and $17 billion to SpaceX.
But payments from those sales are still pending and have failed to come in time to allow the company to meet its obligations to creditors.
EchoStar was able to reach terms with its DISH creditors, resulting in a prepackaged Chapter 11 filing. But that was not the case with Hughes Satellite creditors.
Hughes, which is based in Maryland, informed 400 employees in late July that they would be laid off starting in late September.
EchoStar ranks as Colorado’s second-largest company in market value after Newmont Mining. Its shares rose nearly 7% in trading on Tuesday, reflecting a better than expected earnings report on Monday.
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