DIRECTV 2002 Annual Report Download - page 59

HUGHES ELECTRONICS CORPORATION
PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling $750.0 million in January
1998. The $200 million five-year notes were repaid in January 2003. The outstanding principal
balances and interest rates for the seven, ten and thirty-year notes as of December 31, 2002 were
$275 million at 6.125%, $150 million at 6.375% and $125 million at 6.875%, respectively. Principal on
the notes is payable at maturity, while interest is payable semi-annually. In connection with a new
secured bank facility entered into by PanAmSat in February 2002, described below, these notes were
ratably secured by certain of the operating assets of PanAmSat that were pledged in connection with
the secured bank facility.
Credit Facilities. In February 2002, Hughes amended and increased its existing $750.0 million
multi-year credit facility (the “Amended Credit Agreement”). The Amended Credit Agreement provided
availability of $1,235.2 million in revolving borrowings. The facility was secured by substantially all of
Hughes’ assets other than the assets of DLA and PanAmSat. In March 2002, Hughes borrowed an
additional $764.8 million under a term loan tranche that was added to the Amended Credit Agreement.
The Amended Credit Agreement was subsequently amended in November 2002. The November 2002
amendment reduced the size of the term loan from $764.8 million to $650.0 million and increased the
size of the revolving component to $1,284.0 million, of which $500 million was committed by General
Motors Acceptance Corporation (“GMAC”). In December 2002, EchoStar paid $600 million for the
termination of the merger agreement, which resulted in a $143.7 million mandatory prepayment of the
term loan under the Amended Credit Agreement. Accordingly, the term loan was reduced from $650.0
million to $506.3 million. As of December 31, 2002, the revolving component of the Amended Credit
Agreement was undrawn and $506.3 million was outstanding under the term loan. The Amended
Credit Agreement was terminated on February 28, 2003 and all amounts outstanding were repaid by
Hughes from the proceeds of the DIRECTV Holdings LLC (“DIRECTV”) notes offering described
below.
In the first quarter of 2003, Hughes completed a series of financing transactions to replace the
Amended Credit Agreement with a capital structure that is more long-term in nature. On February 28,
2003, DIRECTV issued $1.4 billion in senior notes due in 2013. The ten-year senior notes are
unsecured indebtedness guaranteed by all of DIRECTV’s domestic subsidiaries and bear interest at
8.375%. In addition, on March 6, 2003, DIRECTV entered into a new senior secured credit facility with
total term loan and revolving loan commitments of $1.675 billion. The new senior secured credit facility
is comprised of a $375.0 million Tranche A Term Loan, $200.0 million of which was undrawn at March
6, 2003, a $1,050.0 million Tranche B Term Loan and a $250.0 million revolving credit facility which
was undrawn at March 6, 2003. The new senior secured credit facility has a term of five to seven years
and is secured by substantially all of DIRECTV’s assets and guaranteed by all of DIRECTV’s domestic
subsidiaries. The revolving credit facility and term loans bear interest at the London Interbank Offered
Rate (“LIBOR”) plus 3.50%. DIRECTV distributed to Hughes the net proceeds from the senior secured
credit facility and the sale of the senior notes totaling $2.56 billion. The $200 million undrawn portion of
the Tranche A Term Loan is expected to be drawn by December 31, 2003 with the proceeds
distributed to Hughes. The revolving portion of the senior secured credit facility will be available to
DIRECTV to fund working capital and other requirements. The above distribution enabled Hughes to
repay all amounts outstanding under its existing Amended Credit Agreement and is expected to
provide sufficient liquidity to fund Hughes’ business plan through projected cash flow breakeven and
for Hughes’ other corporate purposes.
In February 2002, PanAmSat obtained a bank facility in the amount of $1,250 million. The bank
facility is comprised of a $250 million revolving credit facility, which was undrawn as of December 31,
2002, a $300 million Tranche A Term Loan and a $700 million Tranche B Term Loan, both of which
were fully drawn as of December 31, 2002. This bank facility replaced a previously existing
$500 million unsecured multi-year revolving credit facility. The new revolving credit facility and the
Tranche A Term Loan bear interest at LIBOR plus 3.0%. The Tranche B Term Loan bears interest at
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