Shares in EchoStar, which just completed a long-anticipated merger with Dish Network, have jumped more than 35% today after the company said it is officially reviewing its strategic options.While that may not mean an M&A deal is imminent, the hiring of Houlihan Lokey and White & Case “to assist the company in evaluating potential strategic alternatives” was cheered by Wall Street. Volume was nearly 10 times normal levels and the intraday gain, according to Bloomberg, was the stock’s biggest since 2008. Trading at $17.21 at mid-day, the stock is at its highest level since last September.In a press release, EchoStar also announced “a series of strategic transactions to further unlock incremental strategic, financial and operating flexibility.” Those moves included transferring select wireless spectrum licenses into a new EchoStar entity and creating a new unit for 3 million pay-TV subscribers and freeing that division from debt covenants.Dish and EchoStar were both founded by Charlie Ergen, who is now EchoStar’s executive chairman. Ergen had long signaled a plan to pivot away from pay-TV and into wireless, though he has admitted that the odds were stacked against the transition.Bondholders do not appear fond of the company’s moves, however. Bloomberg noted that one group of notes plunged almost 20% to just 58.5 cents on the dollar due to what one expert described as “creditor-on-creditor violence.” In essence, that line of analysis posits that longer-term holders of debt are put at risk by a company shuffling assets and designating unrestricted subsidiaries. With a market value of $4.7 billion, EchoStar has about $20 billion in debt.“This asset allocation enables EchoStar to more optimally position the necessary resources for the execution of its strategic goal of becoming the premier provider of terrestrial mobile, satellite connectivity, and content services” CEO Hamid Akhavan said in the press release.Craig Moffett, a partner at Wall Street research firm MoffettNathanson and a longtime Dish skeptic, does not believe the company or even its parts are for sale. “What seems much more likely,” he wrote in a note to clients, “is that the moves announced this morning are a precursor to a new financing transaction, or perhaps a securitization.”
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