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DISH: Structure FAQ
Joshua Kramer – Senior Analyst - Special Situations
Davis Hebert, CFA – Senior Analyst - Telecom and Cable
EXECUTIVE SUMMARY
- DISH bonds have been under pressure for much of this year, putting the company in an increasingly tense situation.
- Investors have asked us a number of questions over the last few weeks regarding the relative structural priorities of Dish’s various bonds.
- We also address questions regarding Dish’s various commitments to the FCC, and what the penalties could be for failing to meet those commitments.
- Finally, we discuss what financing options exist for Dish to fund its remaining build out and how it might approach the expiring purchase contract for the 800 MHz spectrum it has the right to acquire from T-Mobile.
RELATIVE VALUE
DISH bonds bounce off the bottom, but company acknowledges market effectively closed. DISH bonds seem to have bottomed out after the company has dealt with a host of challenges this year, including a ransomware attack that has threatened its cash cow pay-TV business, continued subscriber losses and cash burn in its subscale wireless business, a clerical error that canceled certain 600 MHz licenses (that also serve as collateral for the 11.75% Sr. Sec. Notes) and management shifting its stance on the 800 MHz purchase option from T-Mobile. Investor patience is wearing thin, given DISH’s willingness to go down to the wire on debt maturities and capital needs remain, including for near-term debt maturities, potential spectrum acquisitions and additional wireless spending as it faces another buildout requirement next month (70% of POPs) and again in 2025 (75% of PEAs). The market has been unforgiving to companies that need additional debt capital and this has played through for DISH. Its 1L bonds are down 7% to 11% in total return YTD and trade near 14% YTW and the unsecured 2026-2029 DBS notes down near 30% in total return (20-25 pts in dollar price). The front-end bonds are down almost 10 pts and trade at 84 dollar price (19% YTW). Lastly, the spectrum-backed bonds (11.75%s issued at DISH Network) are down a more pedestrian 3% in total return, helped by the large coupon and implied low LTV of 35%. Bonds have bounced off the lows over the past week, but chairman and controlling shareholder Charlie Ergen has affirmed that the debt market is effectively closed to the company.
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