S&P upgrades Hughes Satellite

Standard & Poor’s said it raised the corporate credit rating on Hughes Satellite Systems Corp. to BB from BB-.

The agency also said it raised the rating on the company’s senior secured notes to BBB- from BB+. The recovery rating remains at 1, indicating 90% to 100% expected default recovery.

S&P also said it raised the rating on the company’s senior unsecured notes to BB from BB-. The recovery rating remains at 4, indicating 50% to 70% expected default recovery.

The outlook is stable.

The upgrade reflects an expectation that continued EBITDA growth at the company will result in net adjusted leverage in the high-1x range by the end of 2016, the agency said.

The risk of cash flows being diverted from Hughes to ultimate parent EchoStar Corp. has improved due to EchoStar’s sizable cash and marketable securities balance, S&P said.

EchoStar’s solid liquidity position offsets the weaknesses of the digital-set top box business, which has a high level of customer concentration, low margins in the single-digit percent area and low demand at the tail end of product life cycles, the agency said.

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