Moody's rates EchoStar notes, lowers outlook
Moody's Investors Service has assigned at Ba3 rating to a new issue of one billion dollars in 6 5/8% senior unsecured notes issued by EchoStar's wholly-owned subsidiary, EchoStar DBS Corp., the same as the one billion in 10 3/8% notes that it is replacing. But at the same time, Moody's lowered its credit outlook for the satellite TV company to "stable" from "positive."
"The ratings continue to reflect the company's moderately high financial leverage and modest coverage levels; a very competitive operating environment, and related expectations of higher costs to both grow and retain subscribers; and ongoing concerns about diminishing returns on invested capital and the long-term strategic position of the company, including the viability of the current business model on a stand-alone basis. Moody's believes that these broad-based financial and business risks have been compounded of late by an apparent strategic shift to more aggressive fiscal policies for the company, which again tempers what might otherwise be a stronger credit profile and translate into higher ratings, and notwithstanding that the company continues to operationally perform well and maintains comparatively modest balance sheet leverage," Moody's said.
"The shift back to a stable rating outlook incorporates Moody's belief that the company's credit profile is no longer likely to improve to a level meriting a Ba2 senior implied rating over the near-to-intermediate term, nor is it likely to deteriorate of a sufficient magnitude to warrant a return to single-B ratings, for a variety of reasons. Specifically, Moody's notes the significant (1 billion) use of excess cash balances as recently announced (mostly in the second quarter of 2004) to buy back common stock. Although a $1 billion program had been put in place last year, the full magnitude and rapidity of the share repurchases was not anticipated, nor was the incremental one billion dollar program that was recently authorized. The recently completed new debt financing lends goes directly against management's prior representations that further deleveraging transactions (i.e., calling debt with excess cash proceeds) were likely to be completed on an opportunistic and permanent basis," the ratings agency noted.
Here are Moody's ratings for EchoStar and its subsidiary.
EchoStar Communications Corporation (EchoStar)
- $1 Billion of 5-3/4% Convertible Subordinated Notes due 2008 -- B2 (affirmed)
- Senior Implied Rating -- Ba3 (affirmed)
- Issuer Rating -- B1 (affirmed)
- Liquidity Rating -- SGL-1 (affirmed -- see separate write-up on Moody's.com)
- Rating Outlook (all ratings for both EchoStar and EDBS) -- Stable (previously Positive)
EchoStar DBS Corporation (EDBS)
- $1 Billion of 6-5/8% Senior Unsecured Notes due 2014 (new) -- Ba3 (assigned)
- $446 Million (remaining amount) of 9-1/8% Senior Unsecured Notes due 2009 -- Ba3 (affirmed)
- $500 Million of Senior Unsecured Floating Rate Notes due 2008 -- Ba3 (affirmed)
- $1 Billion of 5-3/4% Senior Unsecured Notes due 2008 -- Ba3 (affirmed)
- $1 Billion of 6-3/8% Senior Unsecured Notes due 2011 -- Ba3 (affirmed)
- $1 Billion of 10-3/8% Senior Unsecured Notes due 2007 -- WR (withdrawn)
Are you reading this from a forwarded email?
