U.S. Market Commentary: Distressed Exchanges May Be on Tap and New Spectrum-Backed Deal Expected after Substantial Assets Shift in Dish/EchoStar, Says CreditSights/Covenant Review in Joint Research

LFI partner publications CreditSights and Covenant Review today authored a joint report to describe the Dish/EchoStar transaction announced today, discuss what might be the next steps and explain how Dish may have been able to execute on these transactions under the various governing documents. The full report is available to subscribers online at “DISH/SATS: Bridge Too Far, Downgrading DBS to Sell,” Jan. 10. Excerpts follow:

• Downgrade to Sell on DBS. The DISH set of transactions was very surprising to us, as we believed Ergen would leave DBS alone to preserve M&A optionality and look to raise money backed by additional spectrum. We were clearly wrong and Ergen is looking to take advantage of the market’s skepticism by moving substantial assets (3mn satellite subsidiaries and Sling TV) into an unrestricted subsidiary, likely leading to distressed exchanges, in our view.
• Reiterating Market perform on SATS, Underperform on 11.75% spectrum notes (although likely “safe” for now).
• Complex set of transactions adds to DISH fatigue (and lost trust in Charlie).
• Moving assets out of DBS, exchanges likely forthcoming.
• Preparing for new spectrum-backed deal.

Matt Fuller
LevFin Insights

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