DISH bonds, convertibles mostly higher after offers dropped; market gauges options

By Cristal Cody

Tupelo, Miss., Jan. 30 – DISH DBS Corp.’s bonds traded flat to ½ point better on Tuesday as the market absorbed parent EchoStar Corp.’s late Monday announcement that a subsidiary terminated distressed debt exchange offers for four tranches of notes after widespread negative reactions.

Trading was spread among the company’s tranches with 5¾% notes due 2028 (B2/B-) up ½ point on $7 million of volume.

DISH Network Corp.’s convertible paper also was over 1 point higher after the company reiterated that its exchange offers for two tranches of convertible bonds will continue.

“There was a contingency situation they ended today, so there was some activity,” a trader said.

EchoStar announced the termination of the Jan. 16 exchange offers and consent solicitations from DISH DBS Issuer LLC for the senior notes early Monday night.

DISH DBS had planned to exchange the 5 7/8% senior notes due 2024, 7¾% senior notes due 2026, 7 3/8% senior notes due 2028 and 5 1/8 senior notes due 2029 for up to $3 billion of new secured notes.

It was unclear how many notes were tendered before the termination since that information is usually released later, a source said.

As of early Tuesday, D.F. King & Co., Inc., acting as exchange agent and information agent for DISH’s exchange offers and consent solicitations, had not been notified of the termination, though there was some confusion with the convertibles offer continuing, a source said.

The number of bonds tendered is released “usually after the first full expiration date, then a press release is issued,” the source said.

DISH said in the release that any notes tendered in the offers originally scheduled to expire Feb. 12 will be returned to holders.

The termination followed after at least two credit groups joined together to fight against EchoStar’s announcements this month that it transferred collateral assets out of the company and launched below-par offers considered distressed by the major ratings agencies.

Representatives with Buxton Helmsley Group, Inc., which released a letter on Jan. 22 alleging fraud regarding EchoStar’s merger with DISH, did not return a call on Tuesday.

A creditor group reported by Bloomberg to be working with law firm and DISH debtholder Milbank sent a letter earlier in January noting that DISH’s plan to swap nearly $10 billion of debt for new secured notes violates debtholder agreements, and the plan to transfer collateral could be considered fraudulent. A Milbank representative declined to comment on Tuesday.

On Jan. 10, DISH Network announced the transfer of part of its unencumbered wireless spectrum assets into new subsidiary EchoStar Wireless Holding LLC and the transfer of 3 million subscribers out of the restricted group into unrestricted subsidiaries.

Then on Jan. 12, DISH launched consent solicitations for the unsecured senior and unsecured convertible notes.

EchoStar said the termination of the exchange offers for the DISH DBS bonds does not impact the exchange offers for DISH Network’s 0% convertible notes due 2025 and 3 3/8% convertible notes due 2026.

EchoStar has offered to exchange the convertible bonds for 10% senior secured notes due 2030 with the offers and consent solicitations set to expire Feb. 9.

The company’s plans after completing its acquisition of DISH on Dec. 31 may not be enough.

Craig Moffett, partner and senior research analyst at MoffettNathanson LLC, said in a January note released Tuesday to Prospect News that the merger between EchoStar and DISH Network after a 16-year separation where DISH was a stand-alone entity does not change the technicals much.

DISH’s is still facing subscriber losses across all its businesses, he said.

“Yes, EchoStar’s net cash balance sheet and positive free cash flow can potentially be levered to fund near-term maturities, delaying additional funding needs,” Moffett said. “But not by long; Dish was, and still is, facing a $3B maturity in 2024 at a time when its secured debt trades at low-teens yield and its unsecured issues trade well above 20%.”

“The EchoStar deal was arguably DISH’s best/only option,” he said. “But not much else has changed. The most likely outcome for DISH remains bankruptcy, in our view.”

DISH creeps up

The 5¼ notes due 2026 (B2/B-) were quoted Tuesday in DISH’s most active tranche in the secondary market at 79¼ bid on $10 million of volume, a source reported.

DISH’s 5¾% notes due 2028 (B2/B-) added ½ point to hit 68½ bid on $7 million of supply.

DISH’s 5 1/8 senior notes due 2029 (Caa2/CC) were flat at 39½ bid on $7 million of trading on Tuesday.

The issuer’s 7¾% notes due 2026 (Caa2/CC) also went out unchanged at 60 bid on $2.4 million of trading. The bonds carried the highest yield of the tranches at over 33%.

Meanwhile Tuesday, DISH Network’s 3 3/8% convertible notes due 2026 (Caa2/CC) traded over 1¼ points higher at 58 bid with an equity price of $13.65 on over $8 million of volume, another source said.

The bonds were active during the session and volatile as the paper climbed early. The notes opened the session at 56¼ bid and quickly jumped to the 58 bid to 58¼ bid range before midday. Over the afternoon, the issue climbed as high as 59 bid.

DISH Network’s 0% convertible bonds due 2025 (Caa2/CC) went out 1¼ points better at 71½ bid with an equity price of $13.43 on trading that totaled $8 million. The issue traded as high as over 72 bid by the afternoon before pulling back on some of the day’s gains.

Englewood, Colo.-based satellite broadcaster EchoStar also owns brands that include Boost Mobile, Sling TV and HughesNet.

Shares (Nasdaq: SATS) closed down 1.09% at $13.65, up from a morning low of $13.30.

Distressed index weakens

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns kicked the week off softer at minus 0.94% on Monday.

Returns were down from 0.08% on Friday and 0.45% in the same session last week.

Month-, quarter- and year-to-date total return losses widened to negative 2.33% on Monday from minus 1.41% on Friday and minus 2.42% in the week-ago session.

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