An ad-hoc group of bondholders backing DISH Networks are consulting with law firm Milbank, as the telecom group and parent Echostar executed an asset drop-down transaction moving assets away from holders into an unrestricted subsidiary, according to two sources familiar with the matter.

Echostar is potentially gearing up for a new financing deal with the asset shuffle that transfers assets away from the DISH DBS satellite TV business, said a buysider and a sellside analyst. The company said Wednesday that Houlihan Lokey and White & Case are advising Echostar on alternatives.

The announcement comes days after DISH completed a deal to merge into Echostar to reunite controlling shareholder Charlie Ergen’s telecom companies under one umbrella. The transaction, announced last August and revised in October, unlocked Echostar’s cash as DISH faces billions of dollars in debt maturities starting this year and a high cash burn to build a wireless network.

Bonds issued at DISH DBS declined almost 10 points today after the company announced the transaction. The issuer’s USD 1.9bn 7.75% senior unsecured notes due 2026 traded at 63.75 today down from 69.6 on 9 January, while the USD 2.5bn 5.75% senior secured notes due 2028 traded at 70.875 today down from 78 on 9 January, according to MarketAxess. Meanwhile, the USD 2.75bn 5.25% senior secured notes due 2026 issued by DISH DBS traded down to 81.75 today from 85.3 according to MarketAxess.

Echostar shares soared over 37% on the announcement, giving the company a USD 4.7bn market cap. Among the upcoming maturities is a USD 1bn 2.375% convertible note issued by Dish Network that is due in March.

As part of the plan announced Wednesday, Echostar said it had transferred the ownership of several wireless spectrum licenses from Dish Network into a newly formed unrestricted subsidiary, Echostar Wireless Holding.

In addition, the company unrestricted certain DBS assets including DBS Intercompany Receivable, Sling TV Holding, Sling TV Purchasing, Sling TV and Sling TV Gift Card Corporation. These asset shifts mean that the unrestricted subsidiary now holds around three million of DISH TV’s subscribers.

“Definitively, it’s not good for DISH DBS, neither is it good for DISH Networks,” said the buysider. “When they move this stuff, they are usually teeing up for a financing or some kind of course for an exchange”, the first source added.

Furthermore, the issuer revealed that it had transferred the rights of an existing intercompany loan between DISH Network and DBS to Echostar without any amendments.

“Assets were taken out of the box as a result of loose covenants,” said a legal advisor. “The covenants had a least 19 exceptions to the restricted payment basket.”

Millbank and Echostar did not return requests for comment.