================================================================= DIRECTV LATIN AMERICA BANKRUPTCY NEWS Issue Number 1* ----------------------------------------------------------------- Copyright 2003 (ISSN XXXX-XXXX) March 19, 2003 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- DIRECTV LATIN AMERICA BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's case. New issues are prepared by Iris L. Sasing, Frauline Sinson-Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of DIRECTV LATIN AMERICA BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO DIRECTV LATIN AMERICA BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF DIRECTV LATIN AMERICA [00002] DIRECTV LA'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00003] DIRECTV LATIN AMERICA CHAPTER 11 DATABASE [00004] LIST OF DIRECTV LA'S 20-LARGEST UNSECURED CREDITORS [00005] ORGANIZATIONAL MEETING WITH US TRUSTEE TO FORM COMMITTEES [00006] LARRY CHAPMAN NAMED PRESIDENT & CHIEF OPERATING OFFICER [00007] DEBTOR'S MOTION TO OBTAIN $300 MILLION OF DIP FINANCING KEY DATE CALENDAR ----------------- 03/18/03 Voluntary Petition Date 04/02/03 Deadline for filing Schedules of Assets and Liabilities 04/02/03 Deadline for filing Statement of Financial Affairs 04/02/03 Deadline for filing Lists of Leases and Contracts 04/07/03 Deadline to provide Utilities with adequate assurance 05/17/03 Deadline to make decisions about lease dispositions 06/16/03 Deadline to remove actions pursuant to F.R.B.P. 9027 07/16/03 Expiration of Debtor's Exclusive Plan Proposal Period 09/14/03 Expiration of Debtor's Exclusive Solicitation Period 02/29/04 Expiration of Hughes-Backed $300,000,000 DIP Financing 03/17/05 Deadline for Debtor's Commencement of Avoidance Actions Organizational Meeting with UST to form Committees First Meeting of Creditors pursuant to 11 USC Sec. 341 Deadline for Filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO DIRECTV LATIN AMERICA BANKRUPTCY NEWS ----------------------------------------------------------------- DIRECTV LATIN AMERICA BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's case. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DIRECTV LATIN AMERICA BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) DIRECTV LATIN AMERICA BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's case. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DIRECTV LATIN AMERICA BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF DIRECTV LATIN AMERICA ----------------------------------------------------------------- DIRECTV Latin America, LLC 2400 E. Commercial Blvd. Fort Lauderdale, Florida 33308 Telephone (954) 958-3200 http://www.directvla.com DIRECTV Latin America is the pioneer leader in Direct-To-Home satellite television service to Latin America and the Caribbean. DIRECTV Latin America was founded in 1996. With an estimated 100 million addressable television households in Latin America, DIRECTV LA is one of the most important broadcast ventures in the region. Using only part of its 355-digital video channel capacity, DIRECTV LA broadcasts more than 5,000 hours of programming each day over: * 53 channels with pay-per-view movies on demand from the top seven U.S. studios and 20-some independent studios; * 111 channels of continuous programming; and * 66 channels of CD-quality music. The broad geographic reach of the DLA network enables the company to obtain high quality and sometimes exclusive programming from leading international programming providers. Under long-term programming agreements with HBO Latin America Group and Buena Vista International, Inc., DLA has exclusive rights to direct-to- home distribution of the HBO and Cinemax channels in Brazil and Argentina and The Disney Channel programming in all Latin American markets except Puerto Rico. DLA's programming includes numerous popular sports, special events, family and other offerings on channels such as ESPN, Discovery, MTV, CNN, BBC, Nickelodeon and USA. DLA enjoys local programming affiliations in each of its markets, including longstanding local alliances with the Cisneros Group in Venezuela and Clarin in Argentina. In 2001, DLA secured a contract for the exclusive rights to broadcast and re-sell the FIFA World Cup soccer tournaments, occurring in 2002 and 2006, in Argentina, Chile, Colombia, Mexico, Uruguay and Venezuela. Currently, the service reaches approximately 1,600,000 customers in the region, in a total of 28 markets, including: * Argentina * Brazil * Chile * Colombia * Costa Rica * Ecuador * El Salvador * Guatemala * Honduras * Mexico * Nicaragua * Panama * Puerto Rico * Trinidad & Tobago * Uruguay * Venezuela * Other Caribbean nations DIRECTV LA continues to enhance content offerings and add interactive services like DIRECTV Mail, which includes email, several banking services, video interactive television, video games, weather information services, and an information guide and a breadth of enhanced television services, and is the first interactive television service to reach Spanish and Portuguese- speaking markets in Latin America. DLA believes these Internet- like applications, when bundled with its high quality programming, will be attractive to existing and prospective subscribers. DLA is developing these enhanced technologies in cooperation with leading technology developers and content providers. Subscriber Revenues & ARPU DIRECTV Latin America's operating and financial results improved in 2000 and 2001 and then deteriorated in 2002: Operating Year Subscribers Revenues Income EBITDA ---- ----------- -------- --------- ------ 2002 1,580,000 $680,000,000 ($415,000,000) ($202,000,000) 2001 1,610,000 $727,000,000 ($331,000,000) ($132,000,000) 2000 1,300,000 $541,000,000 ($309,000,000) ($171,000,000) Average monthly revenue per subscriber (commonly referred to as "ARPU" in the industry) for DIRECTV Latin America subscribers was about $35 per month in 2002. This compares to $43 in 2001. The decline is attributable to significant currency devaluations in the region. About $27 of 2002 ARPU is for programming subscriptions and the balance representing equipment leasing fees. Unlike DIRECTV U.S. where the vast majority of subscribers own their receiving equipment, nearly all DLA subscribers lease their equipment. Ownership & Control DIRECTV Latin America, LLC is a multinational company whose members are: 74% by DIRECTV Latin America Holdings, which is a subsidiary of Hughes Electronics Corporation. Hughes Electronics Corporation, a unit of General Motors Corporation, is a world-leading provider of digital television entertainment, broadband satellite networks and services, and global video and data broadcasting. Hughes' earnings are used to calculate the earnings attributable to the General Motors Class H common stock (NYSE:GMH); 21% by Darlene Investments, LLC, an affiliate of the Cisneros Group of Companies; 4% owned by Grupo Clarin S.A.; and 1% (less, actually) owned by Navidad Overseas, Ltd. DIRECTV Latin America employs over 3,100 people in offices located in Buenos Aires, Argentina; Sao Paulo, Brazil; Cali, Colombia; Mexico City, Mexico; Carolina, Puerto Rico; Fort Lauderdale, USA; and Caracas, Venezuela. Local Operating Companies Local Operating Companies, called LOC's, manage on-going sales, marketing and customer service functions in their respective localities. Hughes believes that controlling ownership of the LOC's allows DLA to more effectively implement pan-regional strategic initiatives and manage the day-to-day operations in these key markets. Hughes currently owns (directly or through DLA) a controlling interest in local operating companies in Mexico, Brazil, Argentina and Colombia and is negotiating for control of the LOC's in Venezuela and Puerto Rico. Under licensing agreements, the LOC's are primarily responsible for sales and marketing efforts that are based on and aimed at local market conditions and characteristics. DLA collects a royalty, payable in U.S. Dollars, based on formulae that include (i) a share of DLA's cost to obtain and provide programming, (ii) a share of DLA's satellite service costs, and (iii) a portion of each LOC's programming margin. The Cisneros Group has direct ownership stakes in most of the LOCs, including: * DIRECTV of Venezuela, Galaxy Entertainment de Venezuela and Servicios Galaxy SAT III-R; * DIRECTV of Puerto Rico, Satelites de Puerto Rico; * DIRECTV of Guatemala; * DIRECTV of Caribbean, Galaxy Caribbean; * DIRECTV of Chile; * DIRECTV of Costa Rica, Servicios Directos de Satelite (Costa Rica); * DIRECTV of Ecuador, Galaxy Entertainment de Ecuador; * DIRECTV of Panama, DIRECTVISION (Panama); * DIRECTV of Argentina, Galaxy Entertainment de Argentina; * DIRECTV of Colombia, Galaxy Entertainment de Colombia; and * Galaxy de Nicaragua. DLA has established a comprehensive sales and distribution network designed to acquire new subscribers and to provide efficient installation and customer service. The sales force conducts a range of sales activities, including direct sales, retail sales, rural sales and telemarketing. DLA's marketing management team establishes pan-regional marketing policies, conducts research and provides strategic brand direction and coordinates advertising. DLA believes this enables the company to more effectively develop initiatives for addressing issues that are common to all markets and ensure consistent, high quality branding of DIRECTV throughout the region. DLA encourages its local marketing teams to apply their local expertise to develop targeted campaigns that effectively address target subscribers in each country. The Satellite System Programming from DIRECTV originates from five state-of-the-art broadcast centers spanning five countries and an entire hemisphere. The centers are located in Buenos Aires, Argentina; Caracas, Venezuela, Long Beach, California in the United States; Mexico City, Mexico and Sao Paulo, Brazil. The regional broadcast centers in Latin America operate in conjunction with the California Broadcast Center, which is used to deliver the U.S.-based television and pay-per-view programming included in the DIRECTV service for Latin America. The other broadcast centers provide international programming, including Latin American shows broadcast to the region. The DirecTV service is made possible by a cutting-edge, body- stabilized satellite, the Galaxy VIII-i, with 32 Ku-band transponders using 118 watts traveling-wave tube amplifiers. The 32 transponders cover all of Latin America and the Caribbean. Half of the transponders service Brazil and the rest of the Southern Cone, carrying mostly Portuguese-language programming. The other 16 transponders service the rest of Latin America, the Caribbean and part of the Southern Cone with mostly Spanish- language programming. Competition In each of DLA's markets, DLA competes primarily with other providers of pay television, who distribute their programming via cable, multi-channel multipoint distribution systems or satellite. DLA competes primarily on the basis of programming, price, quality, customer support, brand recognition and reputation; DLA believes that it compares favorably to its competitors in these areas. DLA's principal direct-to-home satellite competitors in the major markets in which it operates are the operating platforms of Sky Global Networks, Inc. DLA competes with Sky Latin America primarily in Brazil, Mexico, Chile and Colombia. Affiliates of Sky Latin America have exclusive agreements with the largest local broadcast companies in each of Brazil and Mexico, which currently prevents DLA from gaining access to some important local programming and could impair DLA's ability to attract and retain subscribers in those markets. Financial & Operational Pressures DLA's 2002 operating results have been adversely affected by the economic and political instability throughout Latin America, as well as the ongoing devaluation of several local currencies. The unfavorable and volatile conditions in certain Latin American countries has made it difficult for DLA to continue to develop its business, generate additional revenues, add new subscribers or achieve profitability. DLA has implemented seven specific steps in an attempt to improve its financial results: (A) renegotiated major supplier contracts, including programming contracts, (B) reduced general and administrative expenses, (C) attempted to eliminate all non-critical business activities, (D) reduced investment in subscriber acquisition costs, as appropriate, in each market, (E) slowed subscriber growth, (F) implemented local currency price adjustments to increase ARPU to offset devaluation and (G) minimized capital expenditures. Hughes has said publicly that it is moving aggressively to restructure or shutdown those businesses that aren't operating profitably and have required large cash investments. Hughes' objective is to implement new business plans to quickly reduce cash requirements and improve the returns on these businesses. In January 2003, DIRECTV Latin America announced the commencement of discussions with certain programmers, suppliers and business associates to address DLA's current financial and operational challenges, and threatened a chapter 11 filing if those talks weren't productive. Hughes wants to reduce the cash requirements of the business and to restructure DLA in a way that ensures its long-term profitability. Latin America has faced very difficult economic and political conditions over the last two years. Major markets, such as Argentina, Brazil and Venezuela, have been experiencing significant currency devaluations, high unemployment rates and/or civil unrest due to economic and political uncertainty. DLA's sees its high fixed costs and substantial debt levels as the problem. DLA says it has no plans for any of the LOC's to seek court protection. Operations in all of the markets across Latin America are presently expected to continue. DLA is pursuing a more selective growth strategy, by focusing only on those countries with more stable economic conditions and where DLA is experiencing growth and rapid investment payback. Additionally, DLA has in place acquisition filters such as incentives to pay by credit card, which DLA believes will result in new customers with improved credit profiles. While this strategy will result in a reduction in the number of new subscribers DLA attains, this more selective approach is expected to result in lower cash requirements and churn rates and better overall subscriber economics for DLA. ----------------------------------------------------------------- [00002] DIRECTV LA'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- FORT LAUDERDALE, Florida -- March 18, 2003 -- DIRECTV Latin America, LLC today announced that in order to aggressively address the Company's financial and operational challenges, it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing applies only to DIRECTV Latin America, LLC, a U.S. company, and does not include any of its operating companies in Latin America and the Caribbean, which will continue regular operations. DIRECTV(TM) is the leading pay television service in Latin America and the Caribbean with approximately 1.6 million subscribers in 28 countries. DIRECTV Latin America, LLC intends to continue providing its DIRECTV service as normal without interruption across Latin America and the Caribbean. "The commitment by DIRECTV Latin America, LLC to provide its customers with the best service and widest array of entertainment options has not changed," said Michael A. Feder, chief restructuring officer, DIRECTV Latin America, LLC. "The action we have taken today in the U.S. is intended to strengthen DIRECTV Latin America and allow us to continue to selectively add new subscribers on a profitable basis and further enhance our product offerings for the benefit of our customers." DIRECTV Latin America, LLC is a Delaware limited liability company owned by DIRECTV Latin America Holdings, a subsidiary of Hughes Electronics Corporation (HUGHES); Darlene Investments LLC, an affiliate of the Cisneros Group of Companies; and Grupo Clarin. Today's filing was made in the U.S. Bankruptcy Court in Wilmington, Delaware. HUGHES has agreed to provide DIRECTV Latin America with a $300 million senior secured debtor-in-possession financing facility (subject to Bankruptcy Court approval) to supplement its existing cash flow and help ensure that vendors, programmers and other business associates receive payment for services incurred after the bankruptcy filing was made. In early January 2003, DIRECTV Latin America, LLC announced it had initiated negotiations with certain programmers, suppliers and business associates in an effort to resolve issues that have affected the financial performance of the Company in recent years, including excessive fixed costs and a substantial debt burden during a time of economic deterioration throughout Latin America. The Company's decision to voluntarily file for Chapter 11 followed its determination that these negotiations would not achieve a satisfactory long-term outcome for DIRECTV Latin America, LLC. Feder said, "We appreciate the efforts by all involved in the discussions regarding a potential out-of-court restructuring. However, we have concluded that a Chapter 11 filing is a necessary and appropriate means of addressing the Company's current financial and operating challenges. We expect this process will enable us to significantly reduce our fixed costs by restructuring or rejecting contracts that are not in line with the current economic realities of the marketplace or that do not provide for programmers and suppliers to appropriately share the risks of exchange rate fluctuation and currency devaluation. The process should also allow us to simplify certain contractual issues and significantly reduce our long-term debt." Feder continued, "Because we have already identified the issues that need to be addressed, we are prepared to move forward quickly and complete the restructuring process as soon as we are able." Concurrent with today's announcement, it was announced that Kevin N. McGrath has retired as chairman of DIRECTV Latin America, LLC, and Larry N. Chapman has been named president and chief operating officer of the Company, effective immediately. DIRECTV Latin America, LLC previously retained AP Services, LLC, an affiliate of AlixPartners, LLC as restructuring advisors and appointed Feder, a principal of the firm, as chief restructuring officer. Feder will continue to oversee the restructuring efforts during the bankruptcy process, reporting to Chapman. In conjunction with today's Chapter 11 filing, DIRECTV Latin America, LLC has filed "First Day Motions" in the court in Wilmington to support its employees and vendors. These filings include requests to continue employee payroll and benefits as usual; to obtain interim approval of the DIP financing from HUGHES and maintain existing cash management programs; and to retain legal and financial professionals to assist with the Company's restructuring. In addition, the Company intends to file motions today seeking to reject certain executory agreements that it has determined to be uneconomic and not in its best long-term interest. These include contracts pertaining to Disney Channel Latin America, MUSIC CHOICE and certain exclusive rights to broadcast the 2006 FIFA World CupT soccer tournament. DIRECTV Latin America, LLC will continue normal business operations in its markets across Latin America and the Caribbean. "We will continue to pursue opportunities to add new programming and services that further enhance the DIRECTV experience for our customers," Feder said. About DIRECTV Latin America DIRECTV is the leading direct-to-home satellite television service in Latin America and the Caribbean. Currently, the service reaches approximately 1.6 million customers in the region, in a total of 28 markets. DIRECTV is currently available in: Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Puerto Rico, Trinidad & Tobago, Uruguay, Venezuela and several Caribbean island nations. DIRECTV Latin America, LLC is a multinational company owned by DIRECTV Latin America Holdings, a subsidiary of Hughes Electronics Corporation; Darlene Investments, LLC, an affiliate of the Cisneros Group of Companies; and Grupo Clarin. DIRECTV Latin America has offices in Buenos Aires, Argentina; Sao Paulo, Brazil; Cali, Colombia; Mexico City, Mexico; Carolina, Puerto Rico; Fort Lauderdale, USA; and Caracas, Venezuela. For more information on DIRECTV Latin America please visit http://www.directvla.com Hughes Electronics Corporation, a unit of General Motors Corporation, is a world-leading provider of digital television entertainment, broadband satellite networks and services, and global video and data broadcasting. The earnings of HUGHES are used to calculate the earnings attributable to the General Motors Class H common stock (NYSE: GMH). ----------------------------------------------------------------- [00003] DIRECTV LATIN AMERICA CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: DirecTV Latin America, LLC Bankruptcy Case Number: 03-10805 (PJW) Chapter 11 Petition Date: March 18, 2003 Bankruptcy Court: United States Bankruptcy Court District of Delaware 824 Market Street, 5th Floor Wilmington, DE 19801 (302) 252-2900 Bankruptcy Judge: The Honorable Peter J. Walsh Debtor's Lead Bankruptcy Counsel: Lawrence K. Snider, Esq. Stuart M. Rozen, Esq. Alex P. Montz, Esq. Sean T. Scott, Esq. Mayer, Brown, Rowe & Maw 190 N. LaSalle Street Chicago, Illinois 60603 Telephone (312) 782-0600 Fax (312) 701-7711 Debtor's Local Bankruptcy Counsel: Joel A. Waite, Esq. M. Blake Cleary, Esq. Young, Conaway, Stargatt & Taylor, LLP The Brandywine Building 1000 West Street P.O. Box 391 Wilmington, Delaware 19899-0391 Telephone (302) 571-6600 Fax (302) 571-1253 Debtor's Restructuring Advisor: AP Services, LLC (an AlixPartners affiliate) Claims Agent: Ron Jacobs Bankruptcy Services LLC Heron Tower 70 East 55th Street, 6th Floor New York, New York 10022 Telephone (212) 376-8902 U.S. Trustee: Frank J. Perch, III, Esq. Office of the U.S. Trustee 844 King Street, Suite 2313 Lockbox 35 Wilmington, DE 19801 Telephone (302) 573-6491 Fax (302) 573-6497 Estimated Total Assets (as of Dec. 31, 2002): $600,000,000 Estimated Total Liabilities (as of Dec. 31, 2002): $1,600,000,000 ----------------------------------------------------------------- [00004] LIST OF DIRECTV LA'S 20-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ Hughes Loan and $1,367,433,742 Attn: Dave Baker Miscellaneous 200 N. Sepulveda Blvd. Debt El Segundo, CA 90245 California Broadcast Center Trade Debt $32,127,494 Attn: Sandra Terry Building A03 - M/S 3000 3800 Via Oro Avenue Long Beach, CA 90810 Buena Vista (Disney) Trade Debt $25,082,664 Walt Disney Television (Latin America) Attn: Luis Perez Two Alhambra Tower, 9th Flr. Coral Gables, FL 33134 HBO Trade Debt $12,632,846 HBO Latin America Media Services, Inc. One Alhambra Plaza, Penthouse Coral Gables, FL 33134 LAPTV Atlanta Partners Trade Debt $5,651,289 Attn: Genaro Rionda 3845 Pleasantdale Road Atlanta, GA 30340 Kirschsports Trade Debt $4,932,000 Grafenauweg 2 P.O. Box 4442 6304 Zug SWITZERLAND Music Choice Trade Debt $3,642,709 Attn: Bob Ellis 300 Welsh Road, Building 1 Horsham, PA 19044 AOL Trade Debt $3,132,825 Attn: Juan Carlos Urdaneta 101 Amrietta Street Atlanta, GA 30303 Viacom -- MTV Trade Debt $2,556,208 Attn: Antionette Zel 1111 Lincoln Road, 6th Floor Miami Beach, FL 33139 Vivendi -- USA Trade Debt $2,301,809 Attn: Eric Denis 804 Douglas Road, Suite 700 Coral Gables, FL 33134 MGM Trade Debt $2,263,301 Attn: Mel Vin Perz Suite 1320 2800 Ponce de Leon Blvd. Coral Gables, FL 33134 Discovery Trade Debt $1,751,625 Attn: Enrique Martinez Suite 190 6505 Blue Lagoon Drive Miami, FL 33126 SONY Trade Debt $1,648,615 Attn: Michael Grindon 10202 West Washington Blvd. Culver City, CA 09232 ESPN (Disney) Trade Debt $1,515,314 Attn: Russell Wolff 605 Third Avenue New York, NY 10158 Troy Limited (Claxson) Trade Debt $1,451,637 Attn: Ralph Haiek 404 Washington Ave., 8th Flr. Miami Beach, FL 33139 Corporacion Venezolana Trade Debt $1,368,504 de Television (Claxson) 550 Biltmore Way, Suite 1180 Coral Gables, FL 33134 Hallmark Trade Debt $966,412 Attn: Eduardo Vera 95 Merrick Way, Suite 460 Coral Gables, FL 33194 Weather Channel Trade Debt $856,994 Attn: Eddie Ruiz Suite 101 8200 N.W. 52nd Terrace Miami, FL 33166 Open TV, Inc. Trade Debt $703,250 Attn: Accounts Receivable 401 East Middlefield Road Mountain View, CA 94043 BBC Worldwide Trade Debt $616,715 Attn: Simon Cottle Room C306 BBC Woodlands 80 Woodlne London W12 OTT UNITED KINGDOM ----------------------------------------------------------------- [00005] ORGANIZATIONAL MEETING WITH US TRUSTEE TO FORM COMMITTEES ----------------------------------------------------------------- Frank J. Perch, III, Esq., the Assistant United States Trustee for Region III stationed in Wilmington, will contact each of DIRECTV LA's 20-largest unsecured creditors to invite them to an organizational meeting for the purpose of forming an official committee of unsecured creditors. To determine the time, date and place for that meeting, contact the U.S. Trustee's office at (302) 573-6491. Creditors interested in serving on a Committee should complete and return a statement indicating their willingness to serve on an official committee. Official creditors' committees, constituted under 11 U.S.C. Sec. 1102, ordinarily consist of the seven largest creditors who are willing to serve on a committee. In some chapter 11 cases, the U.S. Trustee is persuaded to appoint multiple creditors' committees. Official committees have the right to employ legal and accounting professionals and financial advisors, at the Debtor's expense. They may investigate the Debtor's business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtor and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 case to a liquidation proceeding. Immediately following the U.S. Trustee's determinations about how many official committees will be appointed and who will be appointed to each committee, the newly formed committees convene their initial meeting. The first order of business is to listen to the U.S. Trustee explain the powers and duties of the committee as a whole and members' individual responsibilities. The Committee will generally elect a chairman. Thereafter, the Committee typically conducts beauty pageants to select their legal and financial advisors. ----------------------------------------------------------------- [00006] LARRY CHAPMAN NAMED PRESIDENT & CHIEF OPERATING OFFICER ----------------------------------------------------------------- FORT LAUDERDALE, Florida -- March 18, 2003 -- DIRECTV Latin America, LLC today announced that Kevin N. McGrath will retire as chairman, effective immediately. Larry N. Chapman has been named president and chief operating officer of DIRECTV Latin America, LLC, effective immediately. Chapman, who has been with Hughes Electronics Corporation since 1980, will report to Eddy W. Hartenstein, chairman of DIRECTV Latin America, LLC and corporate senior executive vice president of HUGHES. "I have spent almost 26 years working for General Motors and related subsidiaries. For the better part of the past decade I have worked with an extremely talented and dedicated group of people to launch and build DIRECTVT into the leading pay television service in Latin America and the Caribbean," said McGrath. "We were the first all-digital pay television service in Latin America, bringing the highest quality programming to households throughout the region. While I am extremely proud of all that the DIRECTV Latin America team has accomplished and I am confident that the Company will successfully emerge from its restructuring, I feel it is now time for me to move on. Therefore, I have elected to retire and spend more time with my family and pursue other goals." "Kevin deserves much credit for bringing hundreds of channels of digital television programming via satellite to TV viewers in countries throughout Latin America and the Caribbean," said Hartenstein. "Providing such a sophisticated service to consumers in 28 different countries with different cultures and in three languages, was a daunting challenge. We appreciate his enormous contributions and wish him well in his future endeavors." Hartenstein continued, "Both Larry Chapman and I are committed to the successful future of DIRECTV Latin America. Larry is a seasoned veteran of HUGHES and DIRECTV in the U.S. and his breadth of experience and superb knowledge of the satellite television business make him the ideal choice to oversee DIRECTV Latin America during this critical period." DIRECTV Latin America, LLC announced earlier today that in order to aggressively address the Company's financial and operational challenges, it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing applies only to DIRECTV Latin America, LLC, a U.S. company, and does not include any of its operating companies in Latin America and the Caribbean, which will continue regular operations. "Kevin has established a strong leadership team and talented employee base at DIRECTV Latin America and I look forward to working together with Eddy and all DIRECTV Latin America employees as we position the Company for future profitable growth," said Chapman. "While we have a formidable challenge ahead, I'm confident that we will emerge as a stronger and more efficient organization." In December 2002, Chapman was named corporate senior vice president of HUGHES to work with Hartenstein and the DIRECTV Latin America management team applying his exceptional expertise and experience to assist in evaluating and managing the DIRECTV Latin America business consistent with the overall objectives of enhanced competitiveness and profitability. A member of the original DIRECTV launch team in the U.S., Chapman was executive vice president in charge of DIRECTV's Product Development, Marketing and Advertising organizations. In his Product Development role, Chapman was responsible for DIRECTV's receiver development strategy as well as the development and deployment of advanced services such as digital video recording and interactive television. Marketing responsibilities included development and execution of customer offers and promotions, customer upgrade efforts, and customer loyalty programs. Advertising responsibilities included oversight of DIRECTV's advertising agency, advertising strategy, brand management and media planning. From March 2000 through August 2001, Chapman was president of DIRECTV Global Digital Media Inc., a business unit of HUGHES. Before his assignments with DIRECTV, Chapman served in various business development roles at Hughes Communications, Inc., a former satellite services subsidiary of Hughes Electronics Corporation. Chapman holds MS and BS degrees in electrical engineering from the University of Florida. McGrath, who joined HUGHES in 1987, was named chairman of DIRECTV Latin America, LLC and appointed vice president of HUGHES in 1996. Previously, McGrath was president of DIRECTV International. Prior to his position with DIRECTV International, McGrath was named president of Hughes Communications, Inc. in November 1993. Prior to joining HUGHES, McGrath spent a decade in increasingly responsible positions at various units of General Motors Corporation. He joined GM in 1977. ----------------------------------------------------------------- [00007] DEBTOR'S MOTION TO OBTAIN $300 MILLION OF DIP FINANCING ----------------------------------------------------------------- DIRECTV Latin America, LLC, entered into a $450,000,000 Revolving Credit Agreement (Bridge Facility) on January 5, 2001, with -- according to data obtained from http://www.LoanDataSource.com -- a consortium of lenders led by Deutsche Bank AG, New York Branch as Administrative Agent: Lender Commitment ------ ---------- Morgan Stanley Senior Funding, Inc. $134,000,000 Credit Suisse First Boston 95,000,000 Deutsche Bank AG 59,250,000 Morgan Guaranty Trust Company 59,250,000 Bank of America, N.A. 36,000,000 Citicorp USA, Inc. 36,000,000 ING Bank 30,500,000 ------------ Total $450,000,000 Hughes Electronics Corporation guaranteed repayment of DIRECTV LA's obligations and stepped into these Lenders' shoes on February 20, 2002, when DIRECTV LA didn't pay. Hughes has advanced no new funds under the Loan Agreement, nor has it received any payment. Hughes has made additional loans and advances to DIRECTV LA and, at the time of the Chapter 11 filing, is owed $1,345,000,000. DIRECTV LA needs continued funding to operate. Without a fresh supply of credit, the business won't be able to pay its day-to- day expenses. Without immediate access to new post-bankruptcy financing, DIRECTV LA will be forced to cease operations, CFO Craig Abolt says. That result, Mr. Abolt continues, would destroy the company's going concern value, would make a restructuring impossible, and would substantially diminish creditor recoveries. DIRECTV scouted for post-petition financing on an unsecured basis prior to filing for chapter 11 protection. It isn't available. Hughes is the logical lender and has offered to step up to the plate and underwrite a new $300 million senior secured super- priority debtor-in-possession financing facility. Hughes' offer, the Debtor's concluded, is the most attractive and practical solution to meet the Company's postpetition financing requirements. Against this backdrop, Lawrence K. Snider, Esq., at Mayer, Brown, Rowe & Maw in Chicago tells Judge Walsh that the Debtor wants immediate access to $30,000,000 on an interim basis, pending final approval at a Final DIP Financing Hearing when the Company will request authority to access the full $300,000,000. The salient terms of the $300,000,000 Postpetition Financing package are: BORROWER: DIRECTV Latin America, LLC LENDER: Hughes Electronics Corporation COMMITMENTS: $290,000,000 of Revolving Credit and a $10,000,000 subfacility to back letters of credit issued by Bank of America MATURITY DATE: February 29, 2004, or on the Effective Date of a Plan of Reorganization USE OF PROCEEDS: To provide for on-going working capital needs of the debtor in possession, but only in strict accordance with the terms of a [non-public] cash budget delivered supplied to Hughes. INTEREST: The higher of: * Bank of America's reference rate plus 0.5% and * the Federal Funds Rate plus 3.00%. FEES: None, except for reimbursement of expenses and costs. FINANCIAL COVENANTS: The Debtor agrees to comply with three key financial covenants under the DIP Facility: (A) The Debtor and its subsidiaries promise that EBITDA losses will not exceed: For the Fiscal Minimum Quarter Ending EBITDA -------------- -------- June 30, 2003 ($28,600,000) September 30, 2003 ($28,000,000) December 31, 2003 ($36,500,000) (B) The Debtor and its subsidiaries agree to limit capital expenditures to: Fiscal Year Maximum CapEx ----------- ------------- 2003 $98,900,000 2004 $161,200,000 (C) The Debtor and its subsidiaries covenant that revenues will be no less than: For the Fiscal Minimum Quarter Ending Revenue -------------- ------- June 30, 2003 $95,200,000 September 30, 2003 $96,300,000 December 31, 2003 $98,200,000 SECURITY & PRIORITY: Hughes will hold an administrative priority claim and first, senior and perfected security interests in, and liens on, and right of setoff against all of the Debtor's otherwise unencumbered property pursuant to 11 U.S.C. Sec. 364, subject only to a $1,000,000 Carve-out to allow for payment of professionals and fees levied by the United States Trustee and the Court Clerk. Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP, in New York, represents Hughes in this DIP Financing transaction. *** End of Issue No. 1 *** *** Future editions of DIRECTV LATIN AMERICA BANKRUPTCY NEWS are *** available only by subscription. Please complete and return *** the subscription form contained in this newsletter to set-up *** an on-going newsletter subscription. ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------