Satellite video provided Dish Network is planning to raise over a billion dollars for various purposes, and although Wall Street ref Moody’s Investor Service believes the bond issue is neutral, it has problems with the company’s financial structure and transparency generally.
At issue is a senior unsecured bond offering seeking to raise $1.25B maturing about a decade from now in 2014.
Moody’s believes that among the plans for the cash is simple cash replenishment following retirement of a $900M note that matured in October, and getting a head start on repaying a $650M note that matures next year.
However, Moody’s 4.7% leverage level, its tough competitive environment against cable and telco companies which are better equipped to deliver internet and phone service as well as video service, and a couple of other issues have Moody’s saddling the company with a negative outlook, with a Corporate Family Rating of Ba3.
Moody’s said, “Event risks and uncertainty stemming from what direction the company’s wireless strategy will take are only partially tempered by the potential to improve DISH’s DBS business profile, and we remain concerned over the legal credit structure supporting DISH DBS bonds, which possess only minimal protections against leverage and up-streaming cash to its parent, DISH.”
The analysts at Moody’s continued, “Further, the company’s creditors have no recourse to assets held outside of DISH DBS, including the company’s wireless spectrum. Accordingly, uncertainty surrounding strategic plans and future impact on its balance sheet continue to weigh on DISH’s credit ratings as it pursues a potentially transformative entry into the wireless market.”
Moody’s foresees several ways in which the company’s ratings could be downgraded; it sees no immediately viable path to an upgrade.