Hughes Satellite

Hughes Satellite 6.625s due August 1, 2026.

Current price: ~$95.25

YTM: ~13.25%

Cusip: 444454AF9

An Exercise in Expected Value

Who/what is “Hughes Satellite”?

“Hughes Satellite Systems Corporation” (HSSC) is the financing vehicle that houses the Hughes business (Hughes Network Systems and related assets). It sits under EchoStar Corporation, which recombined with DISH in 2024; EchoStar is the parent and allocator of group liquidity. HSSC issues debt that is structurally separated from other EchoStar/DISH silos but ultimately depends on EchoStar’s strategy and cash

The 2026 maturities: size, structure, collateral

HSSC has two August 1, 2026 maturities that together originally totaled $1.5bn:

· $750m 5.250% Senior Secured Notes due 2026 (first-lien on specified Hughes assets)

· $750m 6.625% Senior (unsecured) Notes due 2026 (the 444454AF9s) These tranches were issued together and are documented in HSSC’s exchange/prospectus filings.

· As of September, a substantial amount of the secured notes have been retired or exchanged.

Relationship to EchoStar & why that matters

Credit risk here is a blend of silo fundamentals (Hughes EBITDA, capex for satellites/ground, churn in consumer broadband) and overall Echostar strategy.

In late-2024, S&P wrote that they expected EchoStar to have enough liquidity to repay the ~$1.5bn Hughes 2026 debt with internal cash (before tapping markets), explicitly linking HSSC repayment capacity to group cash management.

In 2025 EchoStar launched a major asset-monetization program—selling spectrum to AT&T (August) and then to SpaceX (September). As of September 15, 2025, EchoStar said it expects ~$24.1bn total cash after using sale proceeds to repay debt, materially improving consolidated liquidity. The SpaceX agreement also shifts about $2bn of EchoStar interest expense through late-2027 to SpaceX, directly easing near-term cash burn as maturities approach.

Repayment pathways for August 1, 2026

Base case (Dr Rhesus Labs assigns 87% probability): Straight cash repayment at HSSC using upstreamed parent liquidity. This is supported by (i) EchoStar’s stated post-transactions cash balance, and (ii) S&P’s earlier view that internal cash could cover the Hughes 2026 stack. The secured and unsecured tranches will be taken out at par.

This view also stems from Dr Rhesus Labs’ view that Hughes’ defense business is a priority, will lead to favorable review in Washington, DC, and is itself a growth driver.

Hughes defense business, in brief:

· On the defense/government side, Hughes markets secure SATCOM, multi-orbit connectivity, rugged terminals, software-defined networks, etc., designed to satisfy United States Department of Defense (DoD) and allied forces.

· Key notes for the defense business include:

o SATCOM for airborne, maritime, mobile (on-the-move) platforms.

o Multi‐transport (GEO, MEO, LEO) architecture for resiliency and low latency. For example, Hughes was selected to provide modems and multi‐orbit support (GEO/MEO/LEO) for certain test scenarios.

o Ground systems/terminals for defense: “off-the-shelf” and customized ground network systems for defense customers.

o Network management, secure/enterprise networking, SD-WAN, managed services for government and defense agencies.

o Example contract: In 2024 EchoStar reported that Hughes Network Systems and Boost Mobile would fulfil an IDIQ contract for the US Navy’s “Spiral 4” wireless products/services program (up to $2.7 billion over 10 years).

Key Macro Hughes Defense drivers:

· Growing demand environment: The military’s focus on “communications-on-the-move” (COTM), “beyond line of sight” (BLoS), and multi‐transport SATCOM implies a potentially growing addressable market.

· Relevance to parent company’s strategic context: For EchoStar/Hughes, this defense segment is meaningfully different from the consumer broadband (Hughesnet) business and may provide diversification and higher-stickiness contracts under longer terms.

Why this part of the business matters

· Defense/military SATCOM is higher margin and strategic: The barriers (ruggedization, secure protocols, regulatory/government approvals) are higher, which tends to favor incumbents like Hughes.

· Multi-orbit capability gives competitive edge: As the DoD and allied forces push for connectivity that is resilient to jamming/interference and includes GEO + MEO + LEO link diversity, Hughes’s demonstration of multi‐orbit modem/terminal capability is a differentiator.

Alternative paths at maturity. (Dr Rhesus Labs assigns a 13% probability)

· Refinancing (secured first-lien or ABS-style against contracted cash flows/satellite assets) if markets price attractively.

· Intra-group solutions (e.g., upstream/downstream loans or guarantees) to smooth execution even if public markets are choppy.

· Exchange offers are less necessary now that asset sales bolster liquidity, but remain a tool EchoStar has used elsewhere.

Key risks to the base case

· Deal/closing risk & timing: Portions of the SpaceX consideration are stock and staged; regulatory/closing timelines could slip, narrowing cushion ahead of 8/1/26.

· Operational drag at Hughes: Consumer broadband competition and any GEO asset issues could dent silo cash flow (more a ratings concern than a paydown constraint given parent cash).

· Structural considerations: While HSSC is a separate issuer, repayment ultimately depends on group cash movement; constraints or new liens at other silos could complicate flows (mitigated by the group’s stated cash position).

Odds of repayment (Dr Rhesus Labs)

Given the disclosed cash after AT&T/SpaceX spectrum sales, the explicit 2024 ratings view that internal cash could handle the ~$1.5bn Hughes wall, and the optionality to refinance if desired, Dr Rhesus would frame the probability of full, timely repayment on August 1, 2026 to be 87%.

Stressed refi (delayed closing of parent transactions, etc) odds at 13%. The residual tail risks are primarily execution/timing on asset-sale proceeds and any unforeseen restrictions on cash mobility within the Echostar complex.

Our Expected Value Exercise:

Odds x Payoff

87%*$100 (par) = 87

5%*$40 (worst case stressed recovery value) = 2

8%*$85 (an exchange/deferral at maturity) = 6.8

Total expected value = 87+2+6.8= $95.80.

Dr Rhesus Labs values the Hughes Satellite 6.625s of August 1, 2026 (cusip 444454AF9) at $95.80. Given the bonds are currently trading at $95.25, Dr Rhesus Labs recommends a hold and buying on weakness.

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