DirecTV Unit Files for Chap. 11 Bankruptcy

The Hughes Electronics Corp. unit responsible for broadcasting the DirecTV satellite-television service in Latin America filed for bankruptcy protection Tuesday and said its chairman, Kevin McGrath, has quit.

A heavy subscriber drain was blamed for the woes at DirecTV Latin America.

The unit said it will ask a judge to approve a $300-million loan from Hughes to continue operating under bankruptcy protection. The region’s largest satellite-TV service had $600 million in assets and $1.6 billion in debts on Dec. 31, according to papers filed in U.S. Bankruptcy Court in Wilmington, Del.

The declining value of Latin American currencies reduced DirecTV’s sales when converted into dollars, and the service lost subscribers amid weakness in the region’s economies. DirecTV Latin America might eventually merge with the Sky Latin America unit of Rupert Murdoch’s News Corp., investors said.

News Corp. executives have said they might buy a controlling stake in Hughes, whose U.S. DirecTV unit is the biggest U.S. satellite-TV service with about 11.2 million subscribers. DirecTV Latin America has about 1.6 million customers.

News Corp. spokesman Andrew Butcher declined to comment.

DirecTV Latin America President Larry Chapman, promoted after McGrath quit, declined to discuss speculation of a merger with News Corp.

Hughes, owed more than $1.3 billion by DirecTV Latin America, is listed in the court papers as the largest unsecured creditor. The unit, about 75% of which is owned by El Segundo-based Hughes, reported a loss of $202 million last year before interest, taxes, depreciation and amortization.

Shares of Hughes, a unit of General Motors Corp., fell 11 cents to $10.21 on the New York Stock Exchange.