The DISH bond experienced a noteworthy decline in yield after the FCC approved the merger with EchoStar, marking a pivotal development for Dish Network Corp.'s debt situation and plans to enhance its 5G network capabilities.
The DISH 5.875 15-Nov-2024 USD bond (US25470XAW56) has seen a notable shift in its yield, dropping by a substantial 614 basis points to 14.3% over the past month.
The significant yield movement is attributed to the recent approval by the US Federal Communications Commission (FCC) for the merger between Dish Network Corp. and EchoStar Corp. The FCC's green light on the deal has led to a surge in DISH Network Corp. shares by 8.2% to $4.29 and a boost of 7.8% for EchoStar shares to $12.29.
The merger, scheduled to close by the end of 2023, brings Dish under the control of EchoStar, a move strategically devised by Charlie Ergen, the co-founder, and chairman of both companies. Dish, grappling with a transition from legacy pay-TV to wireless communication, has accumulated significant debt totaling $24.6 billion. The merger is poised to alleviate debt concerns, providing Ergen's empire with increased funding to expand its 5G network and enhance mobile and broadband offerings.
Industry analysts highlight the merger's pivotal role in easing Dish's debt pressure and securing near-term funding. Dish's shares had experienced a 72% decline this year until the FCC approval. The deal's closure is anticipated to remove a major hurdle for Dish's funding through 2024, especially critical with $2 billion of debt maturing in December 2025.
This positive development follows Dish's recent struggles, marked by a 25-year low in share prices after disappointing third-quarter earnings. The FCC's affirmation underscores Ergen's continued leadership in both companies, ensuring no substantial change in ownership or control. As Dish and EchoStar reunite, the combined entity aims to navigate the competitive landscape, merging Dish's pay-TV business and 5G network with EchoStar's satellite infrastructure, presenting a comprehensive approach to tackle challenges from larger US carriers.
Credit rating agencies have not yet responded to the situation. Dish currently holds a 'Caa2' rating from Moody's and a 'B' rating from S&P, while EchoStar Corp remains unrated.
DISH Network Corp., a holding company that provides pay-TV services, conducts its operations through two main segments: Pay-TV and Wireless. The Pay-TV segment operates under both the DISH and Sling brands, while the Wireless segment is focused on wireless spectrum licenses and associated assets. Established in 1980 by Charles William Ergen, Cantey M. Ergen, and James DeFranco, the company is headquartered in Englewood, CO. Dish Network has a market capitalization of $2.67 billion as of December 22, 2023.
Founded in 1980 by Charles Ergen, EchoStar began as a distributor of C band TV systems and has since evolved significantly. In 1995, it launched its first satellite, EchoStar I, marking a pivotal moment in its trajectory. The year 2008 witnessed a transformative split, leading to the creation of DISH Network Corporation and EchoStar Corporation. Presently, EchoStar Corp. specializes in digital set-top boxes for satellite services, operating through segments like Hughes, providing broadband satellite technologies, and EchoStar Satellite Services (ESS), which owns and leases satellites. Headquartered in Englewood, CO, EchoStar continues to be a significant player in the satellite communication industry. The company has a market capitalization of $1.23 billion as of December 22, 2023.