DISH bonds soften; CSC notes pressured; Telesat drifts lower; Level 3 bonds slide

By Cristal Cody

Tupelo, Miss., Jan. 31 – Names in the cable and telecommunications space remained in the forefront of distressed trading on Wednesday with one issuer sinking over 20 points.

Weak market tone added to the day’s volatility with the slide in stocks following the Federal Reserve’s announcement that it left rates unchanged.

DISH DBS Corp.’s paper was softer with some of the bonds now freed from distressed debt exchange offers since parent EchoStar Corp.’s announcement Monday the offers were terminated.

DISH’s 5 1/8 senior notes due 2029 (Caa2/CC) fell over 2 points to a handle in the high 30s.

Bonds from Altice USA, Inc. subsidiary CSC Holdings, LLC have been pressured in January.

CSC Holdings’ 4 5/8% senior notes due 2030 (Caa2/CCC+) have dropped about 10 points since December.

Sentiment in the cable space has been “sour” at the start of the year, Craig Moffett, partner and senior research analyst at MoffettNathanson LLC, said in a note released Wednesday to Prospect News.

“Altice USA has suffered from both competitive pressure as well as legacy execution missteps,” he said. “With a major maturity wall looming in 2027, liquidity is a legitimate concern.”

Growth will be one of the sticking points for the U.S. cable and telecom sector this year, he said.

DISH is facing a real rate of decline faster than 10% as the satellite TV industry steadily contracts and their other businesses lose market share, he said.

DISH also has a $3 billion bond due this year, its 5 7/8% senior notes due Nov. 15, 2024 (Caa2/CCC+), he said.

“On any traditional valuation basis, SATS looks wildly overvalued; depressed EBITDA leaves them trading at 17x EBITDA, and FCF yield is now negative,” he said. “But that’s not the point. Notwithstanding the merger, bankruptcy remains the most likely outcome here. All that matters is the salvage value of the spectrum.”

In the distressed telecom space, Telesat Canada’s paper was mostly quiet on Wednesday but has drifted lower so far in 2024.

The 5 5/8% senior secured notes due 2026 have dropped about 2 points year to date.

The telecommunications space is facing a better outlook in 2024 than it did in 2023, Drew McReynolds, an analyst with RBC Dominion Securities Inc., said in a note released to Prospect News.

“In 2024, we believe the fundamental set-up – while not perfect – is better than that entering 2023,” he said. “We expect market expansion to moderate competitive intensity, see an unusually uneventful regulatory calendar and believe valuations look reasonable following a healthy reset in 2023.”

Level 3 Financing, Inc.’s paper has dwindled in mostly light secondary trading over the last two sessions, a source said Wednesday.

Level 3’s 3 5/8% senior secured notes due 2029 (B3/B/B-) had jumped 20 points at the week’s start but gave back the gains on Wednesday to head out about 23 points lower following a downgrade of parent Lumen Technologies, Inc. on the prospects of a debt exchange within the next month.

Level 3’s bonds had improved Monday after sliding around 3 points to over 19 points in the prior week following Lumen’s announcement of an amended transaction support agreement reached with a majority group of creditors.

S&P said on Tuesday it downgraded Lumen with the proposed exchange of Level 3 debt likely to be launched in the next month.

Market tone was weak on Wednesday after the Fed’s Federal Open Market Committee said it maintained the target range for the Federal Funds rate at 5¼% to 5½% on the back of solid economic activity, continued job gains and a low unemployment rate.

The FOMC said the “risks to achieving its employment and inflation goals are moving into better balance” as it seeks to achieve inflation at the rate of 2% over the longer run.

While market participants attempt to forecast the first rate cut, the FOMC said in its statement that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”

The S&P 500 index closed down 1.61%.

Treasury yields dropped, sending the benchmark 10-year note yield below 4% on Wednesday. The 10-year note yield fell 9 basis points to 3.96%.

The iShares iBoxx High Yield Corporate Bond ETF declined 22 cents, or 0.28%, to $77.48.

Market volatility was up nearly 10% with the CBOE Volatility index measuring a 9.54% increase to 14.58 over the afternoon and up 7.81% at the close at 14.35.

DISH moves off gains

DISH DBS’ 5¼ senior secured notes due 2026 (B2/B-) slipped about ½ point going into the close on Wednesday, a source said.

The bonds were quoted hanging around the 79 bid area on over $7 million of volume.

The issuer’s 5 1/8 senior notes due 2029 (Caa2/CC) gave back over 2 points to trade with a 37 bid handle on over $2 million of volume by late afternoon.

DISH’s 7 3/8% senior notes due 2028 (Caa2/CC) declined to a 43 bid handle by late afternoon in light trading from around the 45½ bid area on Tuesday.

The 7¾% notes due 2026 (Caa2/CC) traded down about 1¾ points to around 58 bid on $7 million-plus of volume over the session.

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.

EchoStar announced the termination of the Jan. 16 exchange offers and consent solicitations for the senior notes on Monday and said it will continue exchange offers for two tranches of convertible bonds from DISH Network Corp.

The termination followed a move by credit groups to join together to report dismay with EchoStar’s announcements in January that it transferred collateral assets out of the company and launched below-par offers for the bonds.

Englewood, Colo.-based EchoStar closed on its acquisition of DISH on Dec. 31.

CSC paper lower

Altice USA subsidiary CSC Holdings’ 4 5/8% senior notes due 2030 (Caa2/CCC+) traded down about ¼ point to around 51 bid, a source said Wednesday afternoon.

The issue is up about ½ point week to date, but the bonds from the New York-based broadband communications company have been pressured in January and remain down about 10 points since December.

CSC’s 5¾% senior notes due 2030 (Caa2/CCC+) were quoted down ½ point at 53 bid over the session and flat on the week.

Telesat softens

Telesat Canada’s 5 5/8% senior secured notes due 2026 (B3/D) softened about 1/8 point to a 60 bid handle in thin activity on Wednesday, a source said.

The issue was down ¼ point on Tuesday on over $3 million of volume.

The bonds have declined about 2 points year to date.

Ottawa-based parent satellite operator Telesat Corp. will release fourth-quarter earnings results in March.

Level 3 declines

Level 3’s 3 5/8% senior secured notes due 2029 (B3/B/B-) had jumped 20 points to 53 bid on Monday but gave back the gains on Wednesday to head out about 23 points lower at 30 bid on $10 million of trading, a source said.

The 3¾% senior notes due 2029 (B3/CC/CCC+) also sank to 30¾ bid on Wednesday on $7 million of volume from 53 bid on Tuesday following a downgrade of the issue and parent Lumen by S&P Global Ratings on Tuesday.

The notes traded as low as 27 bid on Wednesday.

Lumen reported in the prior week that it reached an amended TSA with subsidiaries Level 3 Financing, Inc. and Qwest Corp. that includes extending the maturities on its bonds mostly to 2029 and beyond.

The outside date of completion for the transaction support agreement is Feb. 29.

The Monroe, La.-based global telecommunications company is scheduled to post fourth-quarter results on Feb. 6.

Distressed returns higher

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns improved on Tuesday to 0.32% from negative 0.94% on Monday.

Month-, quarter- and year-to-date total return losses also improved to minus 2.20% in the prior session versus negative 2.33% on Monday.

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