DISH mixed as EchoStar cash runs short ahead of November debt payment; iHeartMedia up

By Cristal Cody

Tupelo, Miss., March 1 – EchoStar Corp. and subsidiary DISH DBS Corp. took the focus in the distressed space on Friday following the company’s earnings report and after an auditor issued a going-concern statement.

Executive chairman Charlie Ergen skipped the quarterly earnings conference on Friday, with analysts asking about his location.

New chief executive officer Hamid Akhavan addressed the failed DISH exchange offers terminated in January and February for certain bonds and convertible notes.

“We launched two exchange offers designed to address and reduce our overall debt,” he said on the conference call. “The exchange offers we launched were not accepted by our existing investors.”

Akhavan said discussions with certain investors are ongoing and the company welcomes talks with all investors.

“We have work to do to strengthen our capital structure,” he said.

EchoStar intends to meet its debt obligations in March and then has “until November to address the next maturity,” Akhavan said.

DISH has $951 million of debt due in March and $1.98 billion of debt maturing in November.

In EchoStar’s 10-K filed Thursday, the company said it needs additional capital to fund its current obligations, continue investing in its business and to finance acquisitions and other transactions.

“We do not currently have the necessary cash on hand and/or projected future cash flows to fund the November 2024 debt maturity and subsequent interest on our outstanding debt,” according to the regulatory filing with the Securities and Exchange Commission. “To address our capital needs, we are in active discussions with funding sources to raise additional capital and refinance our outstanding debt.”

Independent auditor KPMG LLP, DISH’s auditor since 2002, reported in the regulatory filing on Thursday that the company’s consolidated financial statements have been prepared “assuming that the company will continue as a going concern.”

DISH “has debt maturing in 2024 and expects to use a substantial amount of cash in the next twelve months,” according to the letter. “This raises substantial doubt about its ability to continue as a going concern.”

On Friday, DISH’s paper was trading anywhere from ¼ point to over 1 point lower to ½ point to 1½ points better, depending on the issue, a source said.

Volume was heavy by early afternoon on more than $62 million of secondary action.

DISH’s 5 7/8% notes due Nov. 15, 2024 rose ½ point on more than $24 million of paper changing hands.

DISH’s 7¾% notes due 2026 (Caa2/CC) climbed 1½ points on more than $17 million of paper traded.

Meanwhile, the 5¾% senior secured notes due 2028 (Caa1/B-) dropped around 1¼ points on around $7 million of volume.

Market tone remained positive going into the weekend with stock indices higher.

The S&P 500 index improved 0.8%, with the iShares iBoxx High Yield Corporate Bond ETF up 29 cents, or 0.37%, to $77.18.

The CBOE Volatility index retreated further on Friday by over 2% to 13.11.

The benchmark 10-year Treasury note yield dropped 7 basis points by the end of the session to 4.18%.

Meanwhile, S&P U.S. High Yield Corporate Distressed Bond index month-to-date total returns for February improved from January losses.

Elsewhere, iHeartCommunications, Inc.’s notes extended gains on Friday after moving higher the previous day on the release of a weak fourth-quarter earnings report. The issuer was downgraded over the session.

DISH heavily traded

DISH’s 7¾% notes due 2026 (Caa3/CC) already were active in the first few hours the market was open on Friday, trading about ½ point to 1 point lower at 63 to 63½ bid on over $11 million of supply, a source said.

By late afternoon, the bond reversed losses and traded 1½ points higher at 65½ bid on $17.5 million of volume.

The notes were ending the week more than 1¼ points stronger.

The bonds traded around 60 bid in the same session a week ago.

DISH’s 5 7/8% notes due Nov. 15, 2024 were quoted at 95¼ bid, up ½ point by the afternoon on more than $24 million of volume.

Meanwhile, the 5¾% senior secured notes due 2028 (Caa1/B-) dropped around 1¼ points to just under 68¼ bid on over $7 million of supply.

EchoStar released fourth-quarter and fiscal 2023 earnings late Thursday night and reported 2023 net losses were $1.7 billion versus profit of $2.48 billion in 2022.

Revenue for the combined companies in 2023 was $17.02 billion, down from $18.63 billion the previous year.

Fourth-quarter losses totaled $2.03 billion, compared to $984 million of income in the same quarter a year ago.

Revenue declined to $4.16 billion in the quarter from $4.53 billion in the year-ago period.

EchoStar acquired DISH in December and then alarmed investors and creditors in January on announcements that it was transferring assets out of the company and launched exchange offers for four tranches of DISH senior notes and two tranches of convertible bonds. All the offers ultimately failed to meet minimum tender conditions and were terminated in January and February.

As the conference call began Friday, EchoStar’s legal officer announced a long list of legal precautions ahead of comments, including an admonition that no audio recordings were allowed.

The call was the first earnings call for Akhavan, who has been at the helm of the combined company less than 90 days.

“The merger was an important milestone in both companies’ history,” he said on the call. “We have a value-generating business with strong potential for growth. In the short-term, we need to provide additional liquidity to fund the growth of our business and address near-term maturities.”

EchoStar said in the regulatory filing that its cash and cash equivalents and marketable investment securities totaled $2.4 billion as of Dec. 31.

“Because we do not currently have committed financing to fund our operations for at least twelve months from the issuance of these consolidated financial statements, substantial doubt exists about our ability to continue as a going concern,” according to the filing. “We currently intend to use cash on hand and cash flow from operations to pay the March 2024 debt maturity. However, we do not currently have the necessary cash on hand and/or projected future cash flows to fund the November 2024 debt maturity and subsequent interest on our outstanding debt.”

EchoStar said it is in active discussions with funding sources to raise additional capital and restructure its outstanding debt.

The company, which operates four main business segments that include pay-tv, retail wireless, 5G network deployment and broadband and satellite services, reported it lost 314,000 subscribers in the fourth quarter.

EchoStar executives said Friday that DISH’s network now provides 5G broadband coverage to over 73% of the country.

The company has a deadline in March to the Federal Communications Commission over its commitment to construct a nationwide 5G broadband network, but since it met previous goals, the final build-out deadline has been extended to June 14, 2025 to offer 5G broadband service to at least 70% to 75% of the population.

EchoStar also faces a $3.59 billion payment due April 1 to T- Mobile US Inc. for its 800 MHz spectrum licenses.

The company said in the filing that it has already invested over $30 billion to acquire certain wireless spectrum licenses.

Englewood, Colo.-based satellite owner EchoStar owns companies that include DISH, HughesNet, Boost Mobile and Sling TV.

Shares (Nasdaq: SATS) closed the day 11 cents, or 0.84%, higher at $13.22.

iHeart trades up

iHeartCommunications’ 8 3/8% senior notes due 2027 (Caa3/CCC+) saw the most interest in the name on Friday with the bonds up 1½ points at 61 bid, a source said.

Trading totaled $9.6 million.

On Thursday, the notes added 3½ points on more than $18 million of volume.

The issue traded on Monday about ¼ point higher at 57¼ bid.

iHeartCommunications’ 4¾% senior secured notes due 2028 (Caa1/B+) picked up ¾ point to a quote of 72¾ bid on Friday on nearly $7 million of volume.

The bonds climbed over 2½ points on Thursday on more than $22 million of paper traded.

At the start of the week, the bonds were seen Monday mostly flat at 70½ bid.

iHeartCommunications’ 5¼% senior secured notes due 2027 (Caa1/B+) also moved up ½ point on Friday to 75¼ bid on $6.9 million of trading.

The issue climbed 4 points to 74¾ bid on more than $15 million of volume on Thursday and opened the week mostly unchanged at the 72½ bid area.

Parent iHeartMedia, Inc. on Thursday reported weaker revenue and operating income.

S&P Global Ratings said Friday it downgraded iHeartMedia to CCC+ from B- on refinancing concerns and the company’s weak debt trading levels.

The San Antonio-based radio operator’s stock (Nasdaq: IHRT) had rallied over 22% on Thursday but closed Friday down 18.41% at $2.26.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns were 0.26% on Thursday versus 0.22% on Wednesday, 1.51% on Tuesday and 0.2% on Monday.

Month-to-date total returns for February ended Thursday at 4.88%, improved from January returns of negative 2.15%.

Year-to-date total returns improved to 2.62% from 2.35% on Wednesday, 2.12% on Tuesday and 0.6% on Monday.

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