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Latin DirecTV gains court approval

After judge's decree, co. now looks to creditors

MIAMI – The U.S. bankruptcy court in Delaware has approved a disclosure statement by DirecTV Latin America, paving the way for the company to emerge from court protection by March if creditors give thumbs up to its reorganization plan.

The Ft. Lauderdale, Fla.-based satcaster filed for bankruptcy protection in March of 2003, having registered operating losses of more than $1 billion in the previous two years alone. It was hit hard by recessions in the major markets of the region and the complete collapse of the Argentine economy.

Its cost structure was also affected by foreign exchange exposure from dollar-denominated programming contracts. It also paid an estimated $400 million for exclusive rights to the 2002 and 2006 World Cups in six Spanish-lingo countries — and it was unable to recoup that investment in the soccer tourney by sublicensing rights.

The satcaster submitted its proposed plan of reorganization to the court in December.

At a Friday hearing, Judge Peter J. Walsh ruled that the disclosure statement contained enough information with which DirecTV can seek creditor approval. DirecTV may now approach its creditors to seek their approval for its bankruptcy-exit plan and said it will begin mailings today.

The court has scheduled a confirmation hearing for Feb. 13 to rule on the reorganization plan itself.

Assuming that creditors give the green light to the plan, DirecTV Latin America said it is on track to emerge from bankruptcy by the end of February.

Under the proposed plan, Hughes Electronics will own more than 80% of the reorganized company, up from about 70% pre-bankruptcy.

The bankruptcy filing only pertained to the U.S. parent company operations. In-region operating subsidiaries were not part of the filing.

It is not yet clear how the satcasting landscape in Latin America will ultimately shake-out.

Murdoch’s News Corp. has acquired control of Hughes Electronics, which operates the DirecTV global platform. News Corp. has the Sky platform.

But Latin America is the only region in which the two companies had rival operations — and given the bumpy economies and persistently low rate of pay-TV penetration overall, was never viewed as one that could support two DTH platforms longer term.

Even so, Latin American pay-TV executives speculate that it will take time before the Sky and DirecTV platforms are merged.

DirecTV has a presence in more countries, but Sky is stronger in the key territories of Mexico and Brazil, the two biggest markets for current and potential DTH subs.

Representing another wrinkle for an eventual combination, the Sky Mexican platform is majority owned by local partner Televisa.

In Brazil, Globo had owned a majority stake, but last year restructured its interest, with News Corp. upping its holding.

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