DISH shares were off by more than 11% in the final hour of trading on Wednesday (12/16), as investors soured on the news that it plans to offer $2 billion aggregate principal amount of convertible notes.
DISH Network also expects to grant to the initial purchaser an option to purchase up to an additional $300 million aggregate principal amount of the notes to cover over-allotments, if any.
The net proceeds of the offering are intended to be used for “general corporate purposes,” including 5G network buildout costs.
Moody’s assigned a B1 rating to the offering. It notes that the rating is supported by the substantial asset value derived from DISH’s “vast spectrum holdings, although they have yet to be deployed and monetized.”
It further noted, however, that its rating “reflects our concern that competition from cable and telecommunication companies, who offer multiple products (video, voice, and data in particular), and pressure from changing television consumption habits towards SVOD (subscription video on demand) services like Netflix and other emerging OTT (over-the-top media) platforms, will result in increasing cord cutting of traditional linear pay TV.”
The notes will be unsecured obligations of DISH Network.
Upon any conversion, DISH Network will settle its conversion obligation in cash, shares of its Class A Common Stock, or a combination of cash and shares of its Class A Common Stock, at its election. The interest rate, the initial conversion rate, and other terms and conditions of the notes will be determined by negotiations between DISH Network and the initial purchaser of the notes.
The offering didn’t charm investors. On heavy volume of 15.7 million shares as of 3:15pm Eastern (normal volume is 2.7 million shares), DISH was down $4.05 to $31.63.
The dip erased one month’s worth of gains on the Nasdaq GlobalSelect market,