Hughes Offers Debt Amid SBC Reports - Multichannel

Hughes Offers Debt Amid SBC Reports

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Hughes Electronics Corp. said Monday that it would raise $3 billion in two
separate debt offerings on the heels of reports that the company was in talks to
sell its DirecTV Inc. unit to telephone giant SBC Communications Inc.

In a press release Monday, Hughes said it would privately offer up to $1.4
billion in senior notes due 2013. In addition, DirecTV said it would arrange
another $1.55 billion in new senior secured credit facilities.

Hughes said it expects to close both deals in March. Proceeds of the
offerings would go in part to replace $1.8 billion in secured bank debt that
comes due in August and for general corporate purposes.

The debt-offering announcement comes just days after TheNew York
Times
reported late Friday that SBC was in preliminary talks with Hughes
concerning a possible purchase of DirecTV. However, the Times said talks
were in the very early stages.

The emergence of SBC as a potential bidder could throw a wrench in News
Corp.'s efforts to buy the direct-broadcast satellite service provider. News
Corp. has expressed an interest in buying General Motors Corp.'s 30 percent
interest in Hughes. GM is Hughes' parent company.

DirecTV spokesman Bob Marsocci said the company would have no comment on the
Times story.

"GM has stated that it has several options concerning its ownership stake in
Hughes and it is in the process of evaluating those options," Marsocci said.

In a research report, Banc of America Securities LLC analyst Doug Shapiro
said the possible pairing of SBC and DirecTV could be mixed news for cable.

"While the specter of the RBOCs [regional Bell operating companies] entering
video is a perennial bear case, relative
to News Corp., SBC may be the lesser of two evils," Shapiro wrote.

"SBC has never proved itself a viable video competitor," he added. "We don't
think it will be able to materially improve DBS economics, and we believe cable
would retain a significant economic advantage over an RBOC/DBS bundle."

Other analysts said the potential asking price for Hughes -- upward of $10
billion -- would be substantially dilutive to SBC, making a deal less
attractive.

Investors appeared to feel the same way, driving SBC shares down as much as 7
percent Monday while Hughes shares surged.

Hughes stock rose nearly 7 percent (65 cents per share) before finishing at
$10.26 each, up 51 cents in 4 p.m. trading Monday. SBC stock was down as much as
$1.68 per share Monday before finishing at $24.41 (down 77
cents).

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