Two Direct TV Companies Join

Pegasus Communications Corp. said last week that it plans to buy Golden Sky Holdings for $1.1 billion in stock and debt. In the process, it will add 345,000 subscribers to its direct television services.

Pegasus Communications has $215 million in outstanding junk bonds in two issues; one carries a 9.625% coupon and the other carries a coupon of 9.75%. And Golden Sky has two issues totaling $388.1 million that carry coupons of 12.375% and 13.5%.

Pegasus, a re-seller of DirecTV, focuses on small towns and rural areas that many cable operators avoid due to the high expense in laying lines. DirecTV, also a high yield issuer, is a subsidiary of Hughes Electronics. And in fact, one investor noted that Pegasus would become an increasingly attractive takeover target itself by Hughes.

Hughes hammered out agreements with companies like Pegasus when it was launching its DirecTV services, but it was left with less control over its own customers. And now, Hughes may decide it wants to increase its control by simply buying out companies like Pegasus.

The other big player in the direct television industry, EchoStar, may also step in the picture, however.

To make matters more uncertain, however, Pegasus and Golden Sky filed a suit against DirecTV for breach of contract for marketing premium channels to some rural customers directly instead of via the affiliates.