DISH notes in focus, trade mixed post-merger; Office Properties paper under pressure

By Abigail W. Adams

Portland, Me., Jan. 2 – The distressed debt space opened 2024 with a soft tone after outperforming all other fixed income asset classes in 2023.

The S&P U.S. High Yield Distressed Bond index closed 2023 with a 24% return, almost double the 13% returns of the broader high-yield market.

However, the market was soft on Tuesday with trading activity muted in a slow return from the holiday weekend in the United States.

DISH Network Corp.’s senior notes were in focus following the completion of the DISH/EchoStar merger.

While the company’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 (Caa2/B-) edged higher, its longer-duration notes were flat to lower.

Office Properties Income Trust’s 4½% senior notes due 2025 (Caa1/CCC+) were under pressure in active trade with market sources predicting pain for the commercial real estate market in 2024.

DISH mixed

DISH’s senior notes were mixed in active trade after the company closed its merger with EchoStar Corp.

While its soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 continued to benefit from the news, its longer duration notes were flat to unchanged.

The 5 7/8% notes added about ½ point to trade firmly on a 94-handle.

While there was a trade as high as 95 in intraday activity, the notes were largely trading in the 94¼ to 94¾ context, a source said.

There was $33 million in reported volume.

However, DISH’s 7¾% notes due 2026 were largely unchanged with the notes continuing to trade in the 69 3/8 to 69 5/8 context.

There was $9 million in reported volume.

The yield was 24¾%.

DISH’s 5 1/8% senior notes due 2029 fell more than 1 point.

The notes closed the day wrapped around 50 with the yield about 21%.

DISH’s senior notes enjoyed a late-year bounce as buyers returned to the credit on the eve of its merger with EchoStar.

The merger gives the heavily leveraged company some time and increases the likelihood that it will be able to cover its 2024 maturities, a source said.

However, the company still faces substantial risks.

Office Properties pressured

Office Properties’ 4½% senior notes due 2025 were under pressure in active trade on Tuesday.

The notes fell about ½ point to close the day at 78¼.

The yield was about 29½%, according to a market source.

There was $8 million in reported volume.

The office and mixed-use real estate REIT saw a rough December after S&P Global Ratings slashed its credit ratings to CCC.

The company was a BB credit as recently as April 2023.

Poor operating performance, high leverage and the increased cost of refinancing were pointed to as reasons for the downgrade.

REITs saw a lot of pain in 2023 which is not over, a source said.

Commercial real estate was pointed to as an area of concern as market sources anticipate an uptick in defaults.

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