Moody's downgrades DISH, rates notes Ba3

Moody's Investors Service said it downgraded DISH Network Corp. subsidiary DISH DBS Corp.'s corporate family rating to Ba3 from Ba2, probability of default rating to Ba2-PD from Ba1-PD and senior debt to Ba3 (LGD4, 67%) from Ba2 (LGD4, 67%) and assigned a Ba3 (LGD4, 67%) rating to its $2.5 billion of new senior notes.

The ratings remain under review for downgrade, where they were placed on April 15 following the company's bid to buy Sprint Nextel Corp. for $25.5 billion.

Proceeds from the new notes will be placed in an escrow account earmarked for financing a portion of the cash consideration for DISH's proposed merger with Sprint.

The agency said the downgrade reflects DISH DBS' high gross pro-forma leverage, which will increase to 5.9x from an already high 5.2x (including Moody's standard adjustments as of March 31) as a result of the new issuance. The company has no further capacity for higher gross leverage under its Ba2 rating, irrespective of whether or not it merges with Sprint, Moody's said.

The agency said that even if the company does not merge with Sprint and the new notes are redeemed, the proposed issuance reflects the amount of debt DISH is willing to take on for its wireless strategy, for which Moody's believes it will likely pursue other avenues in the absence of a merger with Sprint.

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