S&P rates DirecTV BB-, loans BB

S&P said it gave DirecTV Entertainment Holdings LLC a BB- issuer rating and assigned BB issue and 2 recovery ratings to its planned senior secured credit facilities, which will consist of a $500 million revolving credit facility due in 2026 and $3.1 billion first-lien term loan due in 2027. The 2 recovery rating indicates an expectation for substantial (70%-90%; rounded estimate: 80%) recovery in default. Subsidiary DirecTV Financing LLC will be the borrower.

“The rating primarily reflects secular industry pressures, aggressive competition, and shifts to streaming services, which will likely continue to contribute to sharp revenue declines. DTV's core business faces intense competition from over-the-top (OTT) video services, including Netflix and Disney+, as well as incumbent cable providers, which can bundle high-speed data services with video to offer more competitive discounts,” the agency said in a press release.

“Leverage is modest and supports to the rating. Notwithstanding DTV's business challenges, leverage and cash flow metrics are strong and offsetting factors to the company's challenging business conditions. We expect S&P Global Ratings-adjusted debt to EBITDA to be in the mid- to high-2x area, over the next couple of years. Our leverage calculation includes the debt-like treatment of both the $1.8 billion 10% senior perpetual preferred instrument owned by TPG and $4.25 billion of 6.5% payment-in-kind perpetual preferred instrument owned by AT&T,” S&P said.

The outlook is stable.

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