DirecTV Latin America Files for U.S. Bankruptcy

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NEW YORK (Reuters) - DirecTV Latin America LLC said on Tuesday it filed for bankruptcy protection, as economic turmoil in Latin America forced the largest pay-television operator in the region to restructure its costs and debts.

DirecTV Latin America, which has been hammered by recessions and strife in Argentina, Venezuela and Brazil that have resulted in fewer subscribers, made the filing under Chapter 11 of U.S. Bankruptcy Code after it failed to renegotiate certain contracts to cut costs.

"We did so after concluding that our out-of-court restructuring negotiations were not going to result in an outcome that would allow us long-term viability," DirecTV's President and Chief Executive Larry Chapman told reporters in a telephone conference call.

The company said it would continue regular business throughout the restructuring process, which is expected to take between 6 months and 12 months.

The company, which is 75 percent owned by Hughes Electronics Corp., said the filing does not apply to Hughes or to DirecTV Latin America's operations in Latin America and the Caribbean. Latin American conglomerates Cisneros Group and Grupo Clarin are also stakeholders.

Hughes, which is owned by General Motors Corp., has agreed to provide $300 million in financing to allow the company to continue operating, while it navigates its way through bankruptcy proceedings.

The financing, called debtor-in-possession financing, is subject to bankruptcy court approval.

DirecTV Latin America also said Kevin McGrath, 49, has retired as chairman and named Larry Chapman president and chief operating officer, effective immediately.

DirecTV Latin America said it would ask the bankruptcy court to reject contracts that are "uneconomic and not in (the company's) best long-term interests," including a contract to broadcast the 2006 World Cup and a deal with Walt Disney to carry the Disney Channel Latin America.

Disney was not immediately available to comment.

DirecTV Latin America executives also said the company hopes to use the bankruptcy process to address Grupo Clarin's option to sell its 4 percent stake in the company in November for $196 million.

The company has also been negotiating with its largest lender Hughes, French set top box supplier Thomson Consumer Electronics and PanAmSat Corp., which is 81 percent owned by Hughes and music provider Music Choice.

Executives also said the company would enter discussions with other programmers whose contracts are set to expire during the bankruptcy procedure.

In the United States, Disney and Hughes are embroiled in a dispute over Disney's ABC Family Channel, with DirecTV threatening to drop the channel rather pay the 35 percent price increase that Disney is demanding.

DirecTV Latin America executives said the DirecTV discussions were unrelated to its own discussions.

The filing was made in the U.S. Bankruptcy Court in Wilmington, Delaware.

Hughes stock traded down 14 cents at $10.18 in afternoon trade on the New York Stock Exchange (news - web sites), while General Motor's stock was up 71 cents at $33.92. Disney's shares traded down 38 cents at $16.63. Additional reporting by Adam Pasick