Dish Network said today that it is offering about $1 billion of its senior notes to institutional investors. It said the net proceeds will be used for general corporate purposes.
In addition to buying Boost Mobile, Dish needs to raise money to build its greenfield 5G wireless network. Dish is paying $1.4 billion for Boost. That deal is set to close on July 1, according to Securities and Exchange Commission filings.
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“We view the debt raise as a positive catalyst as it shores up liquidity,” writes New Street Research analyst Jonathan Chaplin in a note today. “Our assumption is that these are the notes guaranteed by SoftBank for the Boost acquisition. If so, they should come at a low cost.”
As part of the Sprint/T-Mobile merger arrangement, Dish agreed to buy Boost. But according to transcripts from the court case with Judge Marrero in December 2019, Dish got Sprint’s parent company SoftBank to backstop the Boost purchase. SoftBank agreed to help Dish get better terms as far as interest rates, strike price, etc.
“SoftBank committed to guaranteeing the $1 billion debt offering from Dish for the acquisition of Boost,” said Chaplin, although he added that it’s not known for sure whether the $1 billion debt offering Dish announced today is the same $1 billion that SoftBank agreed to guarantee.
$1 billion could go a long way toward Dish’s purchase of Boost. But it will still need to come up with an additional $400 million.
Chaplin writes, “It remains to be seen whether Dish will be able to get a $400 million credit for the 600MHz spectrum lease such that they close on Boost without having to part with a penny in cash.”
Currently, Dish is loaning its 600 MHz spectrum to T-Mobile at no cost in order to bolster T-Mobile’s wireless capacity during the Covid-19 pandemic. But that loan will expire on June 30. Then T-Mobile and Dish will need to negotiate new terms for the 600 MHz spectrum.
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Chaplin said that investors are speculating that instead of T-Mobile paying Dish $150 million a year for three years to lease the 600 MHz spectrum, that Dish might instead get a $400 million lease payment upfront.
“It would be sort of a cute and elegant thing for Ergen to pull off, if, between the debt guarantee and the lease payment, he managed to get Boost without having to pay for it,” said Chaplin.