Dish Debt-Exchange Sale to DirecTV ‘Tantamount to Default’: S&P Global

EchoStar‘s proposed deal to sell Dish Nettoil to DirecTV — for $1 cash and the assumption of $9.75 billion in debt — is akin to Dish defaulting on its debt securities, according to accomprehendledge-rating agency S&P Global.

As part of the deal, Dish DBS proclaimd a “subpar trade propose” for various tranches of its debt totaling around $10 billion, S&P noticed. In includeition, Dish Nettoil Corp. proclaimd an propose to trade $4.9 billion changeible notices for novel securities aextfinishedside $5.1 billion of pledgeted novel money notices being rerentd.

“We see these transactions as tantamount to a default becaengage summarizeateors will get less appreciate than the promise of the distinctive securities,” S&P shelp in a notice Tuesday. “Hgreaterers of existing Dish DBS notices are being proposeed less than the distinctive promise becaengage the trade rate as part of the compulsory trade think aboutation into novel DirecTV rerentr notices is at a transport inant discount to par for most rerents and the maturity dates will be extfinished.” The accomprehendledge-rating agency includeed that in trade the novel notices will carry a higher rate of 8.875% and be shieldedd by assets of the united businesses of DirecTV and Dish.

Reps for Dish and DirecTV didn’t reply to asks for comment.

As a result of the terms of the proclaimd deal, S&P droped its rerentr accomprehendledge rating on Dish DBS and Dish Nettoil from “CCC-” (indicating “a default, troubleed trade, or redemption materializes to be inevitable wilean six months”) to “CC” (which is an obligation “currently highly vulnerable to nonpayment”). The “pessimistic outsee on Dish DBS and Dish Nettoil echos that we will drop the [issuer credit rating] to ‘pickive default’ and the rerent-level ratings on the impacted rerents to ‘D’ [‘default’] if it finishs the trade as proposed.”

Meanwhile, the accomprehendledge-rating firm changed the outsee on EchoStar and sister company Hughes Sainestablishite Systems to preferable “to echo that we could lift” rerentr accomprehendledge ratings to “CCC+” adhereing completion of the Dish Nettoil transactions “based on an betterd wateryity position at EchoStar.” That shelp, S&P shelp the rating upside on EchoStar is foreseeed restrictcessitate to “CCC+” due to “wireless cash burn, execution danger, and unstateivety of EchoStar’s extfinished-term wireless obtainings growth.”

As part of the DirecTV-Dish transaction, TPG Angelo Gordon (TPG’s summarizeatement unit caccessed on accomprehendledge and authentic estate summarizeateing) and some of its co-summarizeateors, aextfinished with DirecTV, provided $2.5 billion of financing to “filledy refinance” the Dish TV business’ November 2024 debt maturity of $2 billion. In includeition, Dish helping lfinishers have pledgeted $5.1 billion in novel money in the establish of 10.75% spectrum-backed shieldedd notices due 2029 (shieldedd by AWS-3 and AWS-4 spectrum assets and contingent on the proposed Dish Nettoil trade closing, which needs 90% participation). And EchoStar accessed into concurments with stateive summarizeateors for an equity issuance in an aggregate buy price of approximately $400 million.

If the DirecTV acquisition of Dish goes thcimpolite — once it gets regulatory approvals, which analysts foresee to occur — the united company would have around 18 million customers, making it the No. 1 U.S. pay-TV provider. However, that subscriber number is down 63% from peak levels in 2016 for DirecTV and Dish, the companies shelp.