DISH Network Corp.'s $1 Billion Senior Unsecured Note Issuance Assigned 'BB-' Rating (Recovery: '3')
NEW YORK (Standard & Poor's) Dec. 19, 2012--Standard & Poor's Ratings Services today assigned its 'BB-' issue-level rating and '3' recovery rating to DISH Network Corp.'s proposed $1 billion of senior unsecured notes, being issued by subsidiary DISH DBS Corp. The '3' recovery rating indicates our expectation for meaningful (50% to 70%) recovery in the event of a payment default.
The Englewood, Colo.-based satellite TV provider said it intends to use the proceeds for general corporate purposes, which we presume will include the execution of its wireless strategy that the company has yet to articulate. Under the proposed issuance size, pro forma fully adjusted debt to EBITDA would rise to about 3.6x as of Sept. 30, 2012. Pro forma cash balances increase to about $7.4 billion as of the same date, prior to payments related to the company's settlement with Cablevision Systems Corp. and AMC Networks Inc. regarding the Voom HD litigation.
Our 'BB-' corporate credit rating and positive rating outlook on the company remain unchanged. We note that DISH recently received approval from the FCC to deploy a terrestrial wireless network with its 40 MHz of AWS-4 spectrum, subject to certain power limitations on its uplink spectrum. Under terms of the ruling, DISH will be required to make its wireless service available to at least 40% of the population in areas covered by its spectrum within the next four years, and 70% within seven years. If DISH is unable to meet the 40% threshold in four years, it must meet 70% coverage in six, rather than seven years. The company stated it could take at least 30 days to provide greater clarity on its wireless strategy following an FCC ruling, which could include more detail surrounding additional near-term and long-term funding needs.
In our view, upgrade potential continues to hinge on the company's ability to execute on this strategy in such a manner that leverage would remain under 4x. This leverage threshold assumes no initial change to our assessment of its "fair" business risk profile. Any longer-term revision of our business risk profile assessment would depend on our view of the company's longer-term business prospects regarding a wireless rollout, especially in light of the mature and very competitive industry landscape, as well as our view of the competitive threats facing its core video business.
(For the corporate credit rating rationale, see the summary analysis on DISH Network published on Oct. 16, 2012.
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Temporary contact number: Michael Altberg (917-612-3324)
DISH Network Corp.
Corporate Credit Rating BB-/Positive/--
DISH DBS Corp.
$1 Bil. Senior Unsecured Notes BB-
Recovery Rating 3
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