DirecTV Latin America to reorganize

www.miami.com Posted on Wed, Mar. 19, 2003
BY CHRISTINA HOAG choag@herald.com

Two months after warning that bankruptcy was imminent, DirecTV Latin America filed Tuesday to reorganize the company's finances and announced a new management team to turn around the troubled satellite TV service.

The Fort Lauderdale-based company, which reported losses last year of $202 million on revenues of $680 million, said it will continue regular operations while under a prepackaged Chapter 11 bankruptcy protection. The filing does not apply to any of its operating companies in Latin America and the Caribbean.

Unable to stanch deepening losses despite extensive cost-streamlining over the previous 18 months, the direct-to-home satellite TV service had warned in January that bankruptcy was on the table if it did not satisfactorily renegotiate contracts with suppliers, programmers and lenders.

''The negotiations didn't give us the contractual modifications we needed for our long-term goals,'' said company spokeswoman Jannice Reyes.

NEW FINANCING

DirecTV's majority stockholder, Hughes Electronics, said it would provide the company with $300 million in debtor-in-possession financing, subject to bankruptcy court approval.

''While we have a formidable challenge ahead, I'm confident that we will emerge as a stronger and more efficient organization,'' said Larry N. Chapman, DirecTV Latin America's new president and chief operating officer.

Hughes named Chapman, formerly Hughes' corporate senior vice president, and Hughes corporate Senior Executive Vice President Eddy W. Hartenstein to lead the turnaround effort.

Hartenstein replaced former Chairman Kevin N. McGrath, who is retiring. The president's post had been vacant.

''I feel it is now time for me to move on,'' McGrath said in a statement. ``Therefore, I have elected to retire and spend more time with my family and pursue other goals.''

DirecTV, which is enjoying robust growth in the United States, is the leading satellite TV provider in Latin America, with 1.6 million subscribers in 28 countries, compared with rival Sky Latin America's 1.4 million.

ECONOMIC SLUMP

Both companies, like other pay TV operators, have been clobbered by Latin America's crashing economies over the past two years. Sky Latin America, owned by Rupert Murdoch's News Corp., reported losses of $152 million in 2002.

Analysts said DirecTV is expected to pull through the restructuring and emerge a competitive player in what should be a profitable market once Latin America's political and economic turmoil subsides.

The region's volatile economic swings have crimped DirecTV's cash flow, and coping with that while servicing debt is the company's challenge, said David Joyce, media analyst at Guzman & Co. in Miami.

TEMPORARY SETBACK

''It's liquidity issues that DirecTV is facing,'' he said. ``They have to take this prepackaged bankruptcy in order not to be swallowed by excessive debt payments. They need to restructure the balance sheets, but will continue to be around and operate, as will other players in the region.''

Hughes, a subsidiary of General Motors, owns 75 percent of DirecTV Latin America. The rest is held by Venezuela's Cisneros Group of Companies and Argentina's Grupo Clarín in a partnership called Darlene Investments.