S&P puts DirectTV on watch

S&P said it placed its DirectTV, including its BBB issuer rating, on CreditWatch with negative implications.

The placement follows DirectTV’s parent AT&T Inc. agreeing to contribute its pay-TV distribution business, consisting of DirecTV, AT&T TV and U-Verse into a joint venture with private equity firm TPG in a transaction valued at about $16.25 billion, S&P said. AT&T will keep a 70% economic stake.

“The negative CreditWatch placement is based on our view of DTV’s business on a stand-alone basis. We view the pay-TV distribution segment as having weak business risk characteristics given the secular industry pressures and intense competition from incumbent cable operators, satellite TV provider DISH Network Corp., and over-the-top streaming services such as Netflix, Hulu, and Disney+,” S&P said in a press release.

The agency said it plans to resolve the CreditWatch once the transaction closes and sees a downgrade that could exceed “one notch based on DTV’s weaker business risk characteristics as a stand-alone entity and the potential for limited extraordinary support from the parent.”

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