Dish Network 2002 Annual Report Download - page 85

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-25
The indentures related to certain of EDBS’ senior notes contain restrictive covenants that require EchoStar to
maintain satellite insurance with respect to at least half of the satellites it owns or leases. All of EchoStar’s eight in-orbit
DBS satellites are currently owned by direct or indirect subsidiaries of EDBS. Insurance coverage is therefore required
for at least four of EchoStar’s eight satellites. The launch and/or in-orbit insurance policies for EchoStar I through
EchoStar VIII have expired. EchoStar has been unable to obtain insurance on any of these satellites on terms acceptable
to EchoStar. As a result, EchoStar is currently self-insuring these satellites. To satisfy insurance covenants related to
EDBS’ senior notes, EchoStar has reclassified an amount equal to the depreciated cost of four of its satellites from cash
and cash equivalents to cash reserved for satellite insurance on its balance sheet. As of December 31, 2002, cash
reserved for satellite insurance totaled approximately $151 million. The reclassifications will continue until such time, if
ever, as EchoStar can again insure its satellites on acceptable terms and for acceptable amounts, or until the covenants
requiring the insurance are no longer applicable.
4. Long-Term Debt
9 1/4% Seven Year and 9 3/8% Ten Year Notes
On January 25, 1999, EDBS sold $375 million principal amount of the 9 1/4% Seven Year Notes which
mature February 1, 2006 and $1.625 billion principal amount of the 9 3/8% Ten Year Notes which mature February 1,
2009. Interest accrues at annual rates of 9 1/4% and 9 3/8%, respectively, and is payable semi-annually in cash in
arrears on February 1 and August 1 of each year, commencing August 1, 1999.
Concurrently with the closing of the 9 1/4% Seven Year Notes and 9 3/8% Ten Year Notes offering, EchoStar
used approximately $1.658 billion of net proceeds received from the sale of the 9 1/4% Seven Year and 9 3/8% Ten
Year Notes to complete tender offers for its then outstanding senior notes issued in 1994, 1996 and 1997. In February
1999, EchoStar used approximately $268 million of net proceeds received from the sale of the 9 1/4% Seven Year and
9 3/8% Ten Year Notes to complete the tender offers related to the 12 1/8% Senior Exchange Notes due 2004, issued on
January 4, 1999, in exchange for all issued and outstanding 12 1/8% Series B Senior Redeemable Exchangeable
Preferred Stock.
With the exception of certain de minimis domestic and foreign subsidiaries, the 9 1/4% Seven Year and
9 3/8% Ten Year Notes are fully, unconditionally and jointly and severally guaranteed by all subsidiaries of EDBS.
The 9 1/4% Seven Year and 9 3/8% Ten Year Notes are general senior unsecured obligations which:
• rank pari passu in right of payment to each other and to all existing and future senior unsecured
obligations;
• rank senior to all existing and future junior obligations; and
• are effectively junior to secured obligations to the extent of the collateral securing such obligations,
including any borrowings under future secured credit facilities.
Except under certain circumstances requiring prepayment premiums, and in other limited circumstances, the
9 1/4% Seven Year and 9 3/8% Ten Year Notes are not redeemable at EDBS’ option prior to February 1, 2003 and
February 1, 2004, respectively. The 9 1/4% Seven Year Notes are subject to redemption, at the option of EDBS, in
whole or in part, at redemption prices decreasing from 104.625% during the year commencing February 1, 2003 to
100% on or after February 1, 2005, together with accrued and unpaid interest thereon to the redemption date. EDBS
elected to retire all of its outstanding 9 1/4 % Senior Notes due 2006, three years early pursuant to its optional early
redemption right (Note 14). The 9 3/8% Ten Year Notes are subject to redemption, at the option of EDBS, in whole or
in part, at redemption prices decreasing from 104.688% during the year commencing February 1, 2004 to 100% on or
after February 1, 2008, together with accrued and unpaid interest thereon to the redemption date.