DirecTV Cancels Sale of Bonds
DirecTV Group Inc., the biggest U.S. satellite TV firm, canceled a planned $500-million junk bond sale rather than pay the higher interest rates investors have demanded on lower-quality bonds since early March.
The company said it would instead borrow more under a planned loan arrangement with its banks. The proceeds would be used to refinance existing debt.
“We felt the economics were more favorable going this route,” DirecTV spokesman Bob Marsocci said Wednesday. He wouldn’t comment further or say how much the company would save by using loans.
El Segundo-based DirecTV said March 11 that it would borrow $2 billion from banks and issue $500 million of junk bonds.
But the junk market has been riled over the last month by concerns about the economy. Record oil prices have raised fears of a consumer and business spending slowdown.
And in mid-March, General Motors Corp., the third-biggest corporate debtor, said 2005 earnings would be far below expectations, triggering heavy selling of its bonds as some investors worried about the company’s ability to repay its debts.
Many junk bonds have fallen sharply in price as investors have sold the securities. As bond prices drop, the yields on the securities rise. The yield on an index of 100 junk bonds tracked by KDP Investment Advisors was 7.29% on Wednesday, up from a record low of 6.35% on Dec. 15.
DirecTV’s debt is rated BB by Standard & Poor’s, two levels below investment grade.
Also Wednesday, Sunnyvale, Calif.-based Finisar Corp. filed a lawsuit against DirecTV in federal court, alleging that the company infringed a patent related to TV program guides.
The patent relates to a technology “used to provide subscribers with access to the contents of a large database while using a manageable amount of bandwidth,” Finisar said. The company said the technology was invented by Frank Levinson, Finisar’s chief technology officer.
Finisar is seeking monetary damages and an injunction.
A DirecTV spokesman said that “based on our initial assessment, there is no valid claim.”
DirecTV shares rose 9 cents to $14.49 on the New York Stock Exchange.
