Pegasus Satellite files for Chapter 11

New York, June 2 - Pegasus Communications Corp. said three of its subsidiaries, Pegasus Satellite Television, Inc., Pegasus Satellite Communications, Inc., and Pegasus Media & Communications, Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

The filing also includes some of the subsidiaries' own subsidiaries.

Pegasus said the filing was made in order to prevent the National Rural Telecommunications Cooperative and DirectTV from seeking to implement what Pegasus called "an unlawful termination of Pegasus Satellite Television's agreements for exclusive distribution of DirectTV services."

Pegasus said it will ask the bankruptcy court to confirm Pegasus Satellite Television's "valuable rights." It will also seek damages resulting from NRTC's and DirecTV's actions to impair those rights, including what Pegasus said was NRTC's breach of its duties to Pegasus Satellite Television, NRTC's majority owner.

Pegasus Satellite Television believes the filing will also enable it to continue to provide uninterrupted service to its 1.1 million rural subscribers during the resolution of these disputes and to continue to meet its responsibilities to its employees and business partners in the ordinary course.

The filing is the latest stage in an ongoing dispute with DirecTV over the length of its exclusive right to distribute DirecTV services.

Pegasus said the dispute was brought to a head Wednesday morning when NRTC and DirecTV said they were terminating terminate Pegasus Satellite Television's exclusive distribution arrangements with the NRTC.

"Action this morning [Wednesday] by NRTC and DirecTV that purports to terminate our long-standing agreements is unlawful," said Mark Pagon, chairman and chief executive officer of Pegasus Communications Corp., in a news release.

"We intend to take all appropriate actions necessary to prevent NRTC and DirecTV from implementing this latest scheme to deprive our stakeholders of the substantial value that we have successfully created in our satellite television business since 1994.

"It is with the greatest reluctance that we have concluded that Pegasus Satellite Television must seek the protection of Chapter 11 in order to protect our customers, employees, business partners, creditors and owners - while we seek affirmation of our rights. We intend to pursue a resolution of these matters as expeditiously as possible."

In its Chapter 11 filing, Pegasus Satellite listed assets of $1.763 billion and liabilities of $1.878 billion.

It listed $900 million of debt securities including $342.9 million of 11¼% senior notes due 2010, $158.2 million of 12 3/8% senior notes due 2006, $128.8 million of 13½% senior subordinated discount notes due 2007, $118.5 million of 12½% senior notes due 2007, $80.6 million of 9 5/8% senior notes due 2006 and $71.1 million of 9¾% senior notes due 2006.

Pegasus also listed 184,000 shares of 12¾% cumulative exchangeable preferred stock in two series.

Pegasus, a Bala Cynwyd, Pa. provider of digital satellite television service to rural areas, filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Maine. Its Chapter 11 case number is 04-20889.

Miller Buckfire Lewis Ying & Co., LLC is financial advisor for the companies filing for Chapter 11.

Companies not filing for Chapter 11 including, in addition to the parent Pegasus Communications Corp.:

* Pegasus Development Corp., which holds two Ka band satellite licenses granted by the FCC and intellectual property rights licensed from Personalized Media Communications LLC;

* Pegasus Guard Band LLC, which holds FCC licenses to provide terrestrial communications services in the 700 MHZ spectrum;

* Pegasus Rural Broadband LLC, which is developing a business to provide broadband internet access in rural areas.

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