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Debt and Capital Lease Obligations | 12 Months Ended
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Dec. 31, 2013
Debt and Capital Lease Obligations |
Debt and Capital Lease Obligations | Note 10. Debt and Capital Lease Obligations As of December 31, 2013 and 2012, our debt primarily consisted of our Senior Secured Notes and Senior Notes, as defined below (collectively, the "Notes"), and our capital lease obligations. The Notes are registered with the Securities and Exchange Commission. The following table summarizes the carrying amounts and fair values of our debt:
|  |  |  | As of December 31, |
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|  |  |  | 2013 |  | 2012 |
|  | Interest Rates |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value |
|  |  |  | (In thousands) |
61/2% Senior Secured Notes due 2019 |  |  | 6.500% |  | $ | 1,100,000 |  | $ | 1,193,500 |  | $ | 1,100,000 |  | $ | 1,210,000 |
75/8% Senior Notes due 2021 |  |  | 7.625% |  |  | 900,000 |  |  | 1,001,250 |  |  | 900,000 |  |  | 1,026,450 |
Other |  |  | 5.50%-15.75% |  |  | 1,588 |  |  | 1,588 |  |  | 2,041 |  |  | 2,041 |
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Subtotal |  |  |  |  |  | 2,001,588 |  | $ | 2,196,338 |  |  | 2,002,041 |  | $ | 2,238,491 |
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Capital lease obligations(1) |  |  |  |  |  | 420,800 |  |  |  |  |  | 486,458 |  |  |  |
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Total debt and capital lease obligations |  |  |  |  |  | 2,422,388 |  |  |  |  |  | 2,488,499 |  |  |  |
Less: Current portion |  |  |  |  |  | (69,791 | ) |  |  |  |  | (67,706 | ) |  |  |
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Long-term portion of debt and capital lease obligations |  |  |  |  | $ | 2,352,597 |  |  |  |  | $ | 2,420,793 |  |  |  |
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(1) Disclosure regarding the fair value of capital lease obligations is not required. We estimated the fair value of our publicly traded long-term debt using market prices in less active markets (Level 2). 61/2% Senior Secured Notes due 2019 On June 1, 2011, Hughes Satellite Systems Corporation ("HSS"), our wholly-owned subsidiary issued $1.10 billion aggregate principal amount of its 61/2% Senior Secured Notes (the "Senior Secured Notes") at an issue price of 100.0%, pursuant to a Secured Indenture dated June 1, 2011 (the "Secured Indenture"). The Senior Secured Notes mature on June 15, 2019. Interest accrues at an annual rate of 61/2% and is payable semi-annually in cash, in arrears on June 15 and December 15 of each year. The Senior Secured Notes are redeemable, in whole or in part, at any time at a redemption price equal to 100.0% of the principal amount thereof plus a "make-whole" premium, as defined in the Secured Indenture, together with accrued and unpaid interest, if any, to the date of redemption. Prior to June 15, 2014, HSS may also redeem up to 35.0% of the aggregate principal amount of the Senior Secured Notes at a redemption price equal to 106.5% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from certain equity offerings or capital contributions. In addition, prior to June 15, 2015, HSS may redeem up to 10.0% of the outstanding Senior Secured Notes per year at a redemption price equal to 103.0% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption. The Senior Secured Notes are: • general secured obligations of HSS; • secured by a first priority security interest in substantially all of the assets of HSS and certain of its subsidiaries, subject to certain exceptions and Permitted Liens (as defined in the Secured Indenture); • effectively junior to HSS' obligations that are secured by assets that are not part of the Collateral (as defined in the Secured Indenture) that is securing the Senior Secured Notes, in each case to the extent of the value of the Collateral securing such obligations; • effectively senior to HSS' existing and future unsecured obligations to the extent of the value of the Collateral securing the Senior Secured Notes, after giving effect to Permitted Liens; • senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the Senior Secured Notes; • structurally junior to any existing and future obligations of any non-Guarantor Subsidiaries (as defined in the Secured Indenture); and • unconditionally guaranteed, jointly and severally, on a general senior secured basis by each Guarantor (as defined in the Secured Indenture). Subject to certain exceptions, the Secured Indenture contains restrictive covenants that, among other things, impose limitations on the ability of HSS and, in certain instances, the ability of its Restricted Subsidiaries (as defined in the Secured Indenture), to: • pay dividends or make distributions on HSS' capital stock or repurchase HSS' capital stock; • incur additional debt; • make certain investments; • create liens or enter into sale and leaseback transactions; • merge or consolidate with another company; • transfer and sell assets; • enter into transactions with affiliates; and • allow to exist certain restrictions on the ability of certain subsidiaries of HSS to pay dividends, make distributions, make other payments, or transfer assets to us. In the event of a change of control, as defined in the Secured Indenture, HSS would be required to make an offer to repurchase all or any part of a holder's Senior Secured Notes at a purchase price equal to 101.0% of the aggregate principal amount thereof, together with accrued and unpaid interest thereon to the date of repurchase. As discussed above, HSS and certain of its subsidiaries have granted a first priority security interest in substantially all of their assets, subject to certain exceptions and permitted liens, in connection with HSS' issuance of $1.10 billion aggregate principal amount of its Senior Secured Notes. 75/8% Senior Notes due 2021 On June 1, 2011, HSS issued $900.0 million aggregate principal amount of its 75/8% Senior Notes (the "Senior Notes") at an issue price of 100.0%, pursuant to an Unsecured Indenture dated June 1, 2011 (the "Unsecured Indenture"). The Senior Notes mature on June 15, 2021. Interest accrues at an annual rate of 75/8% and is payable semi-annually in cash, in arrears on June 15 and December 15 of each year. The Senior Notes are redeemable, in whole or in part, at any time at a redemption price equal to 100.0% of the principal amount plus a "make-whole" premium, as defined in the Unsecured Indenture, together with accrued and unpaid interest, if any, to the date of redemption. Prior to June 15, 2014, HSS may also redeem up to 35.0% of the aggregate principal amount of the Senior Notes at a redemption price equal to 107.625% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from certain equity offerings or capital contributions. The Senior Notes are: • general unsecured obligations of HSS; • effectively junior to HSS' obligations that are secured to the extent of the value of the collateral securing such obligations; • senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the Senior Notes; • structurally junior to any existing and future obligations of any non-Guarantor Subsidiaries (as defined in the Unsecured Indenture); and • unconditionally guaranteed, jointly and severally, on a general senior basis by each Guarantor (as defined in the Unsecured Indenture). Subject to certain exceptions, the Unsecured Indenture contains restrictive covenants that, among other things, impose limitations on the ability of HSS and, in certain instances, the ability of its Restricted Subsidiaries (as defined in the Unsecured Indenture), to: • pay dividends or make distributions on HSS' capital stock or repurchase HSS' capital stock; • incur additional debt; • make certain investments; • create liens or enter into sale and leaseback transactions; • merge or consolidate with another company; • transfer and sell assets; • enter into transactions with affiliates; and • allow to exist certain restrictions on the ability of certain subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to us. In the event of a change of control, as defined in the Unsecured Indenture, HSS would be required to make an offer to repurchase all or any part of a holder's Senior Notes at a purchase price equal to 101.0% of the aggregate principal amount thereof, together with accrued and unpaid interest thereon to the date of repurchase. Debt Issuance Costs In connection with the issuance of the Notes, we incurred $58.1 million of debt issuance costs, which are included in "Other noncurrent assets, net" in our Consolidated Balance Sheets. For the years ended December 31, 2013, 2012 and 2011, we amortized $5.4 million, $5.0 million and $2.8 million of debt issuance costs, respectively, which are included in "Interest expense, net of amounts capitalized" in our Consolidated Statements of Operations and Comprehensive Income (Loss). Capital Lease Obligations Our capital lease obligations reflect the present value of future minimum lease payments under noncancelable lease agreements, primarily for certain of our satellites (see Note 8). These agreements require monthly recurring payments, which include principal, interest, an amount for use of the orbital location and estimated executory costs, such as insurance and maintenance. The monthly recurring payments generally are subject to reduction in the event of failures that reduce the satellite transponder capacity. Certain of these agreements provide for extension of the initial lease term at our option. The effective interest rates for our satellite capital lease obligations range from 7.78% to 10.97%, with a weighted average of 9.87% as of December 31, 2013. As discussed in Note 19, we have subleased transponders on certain of our leased satellites to DISH Network. The following satellites are accounted for as capital leases and depreciated over the terms of the respective satellite service agreements on a straight-line basis. AMC-15. AMC-15 commenced commercial operation during January 2005. This lease is renewable by us on a year-to-year basis following the initial ten-year term, and provides us with certain rights to lease capacity on replacement satellites. AMC-16. AMC-16 commenced commercial operation during February 2005. This lease is renewable by us on a year-to-year basis following the initial ten-year term, and provides us with certain rights to lease capacity on replacement satellites. Nimiq 5. Nimiq 5 was launched in September 2009 and commenced commercial operation at the 72.7 degree west longitude orbital location in October 2009, where it provides additional high-powered capacity to our satellite fleet. The lease is renewable by us on a month-to-month basis following the initial 15-year term. QuetzSat-1. In 2008, we entered into a ten-year satellite service agreement with SES Latin America S.A. ("SES Latin America") to lease all of the capacity on QuetzSat-1. QuetzSat-1 was launched on September 29, 2011 and was placed into service during the fourth quarter of 2011 at the 67.1 degree west longitude orbital location. We commenced payments under our agreement with SES Latin America upon the placement of the QuetzSat-1 satellite at the 67.1 degree west longitude orbital location. In 2008, we also entered into an agreement with DISH Network pursuant to which DISH Network has agreed to lease certain of the DBS transponders on QuetzSat-1 from us when it was placed into commercial operation at the 77 degree west longitude orbital location, which occurred in January 2013. See Note 19 for further discussion on our agreement with DISH Network relating to QuetzSat-1. Future minimum lease payments under these capital lease obligations, together with the present value of the net minimum lease payments as of December 31, 2013, are as follows:
|  | Amount |
--- | --- | --- | ---
|  | (In thousands) |
For the Years Ending December 31, |  |  |  |
2014 |  | $ | 144,020 |
2015 |  |  | 90,022 |
2016 |  |  | 87,965 |
2017 |  |  | 87,965 |
2018 |  |  | 87,807 |
Thereafter |  |  | 433,583 |
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Total minimum lease payments |  |  | 931,362 |
Less: Amount representing lease of the orbital location and estimated executory costs (primarily insurance and maintenance) including profit thereon, included in total minimum lease payments |  |  | (276,007 | )
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Net minimum lease payments |  |  | 655,355 |
Less: Amount representing interest |  |  | (234,555 | )
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Present value of net minimum lease payments |  |  | 420,800 |
Less: Current portion |  |  | (68,360 | )
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Long-term portion of capital lease obligations |  | $ | 352,440 |
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For the years ended December 31, 2013, 2012 and 2011, we received sublease rental income of approximately $126.7 million, $78.9 million and $62.2 million, respectively. As of December 31, 2013, our future minimum sublease rental income was $875.9 million relating to our satellites. See "Nimiq 5 Agreement" and "QuetzSat-1 Agreement" in Note 19 for further discussion on our lease agreements with DISH Network.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References No definition available. + Details
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